Real Estate Trends to Watch in 2024

This time of year, EVERY YEAR, all of my clients, colleagues, friends, and family ask: "what is going to happen with real estate next year?!" So, here are my honest thoughts for 2024: Warning: I may not have a crystal ball, but I do have over 15 years of experience in selling luxury real estate with over $6B worth of transactions under my belt. However, it's still important to note that these are nothing more than educated guesses. 1. We are going to have even greater BIFURCATED MARKETS. Some industries are returning to pre-COVID patterns, while others are now permanently changed. As a result, there is significant interest in the repositioning of big box retail and commercial space. 2. Stemming from the increase in work from home, there will be more NATIONAL SEARCHES. People are now expanding their searches drastically. Rather than looking at comps in a building, neighborhood, or city, they're looking comps across multiple states! 3. SUBURBS are on the rise. This is driving up the demand for bigger homes with more amenities and privacy. Transaction volume is down by over 50% and listing volume is down by over 20%... yet median pricing is up by almost 5%. This creates more tax dollars for the suburbs, so if you're an investor, pay attention to what the municipalities are doing with that money (schools, restaurants, parks, etc.). 4. BRANDED RESIDENCES will be in strong demand. Since 2010, we've seen 40% growth in branded residences – and buyers have proven to be willing to pay a premium for them. 5. DOWNTOWNS built around professional workers will feel immense pressure. Don't get me wrong: Downtowns are not going to go away... but stemming from my 2nd and 3rd points, we are going to see even greater pressure on dense living spaces. 6. Investors are going to become BEARISH on real estate. I hesitate to talk about this because I'm in the real estate business... but with high interest rates, low supply, and low transaction volume, fewer investors are going to be looking to acquire property (in the near term!). 7. Prices are going to continue to... INCREASE! I know – this sounds crazy, right? The lack of inventory is going to continue, and it's going to keep prices high and growing. As the economy continues to do well and inventory stays locked, demand is going to continue to outpace supply. And if interest rates do come down... if you think prices are high now, just get ready. 8. Interest rates will actually STABILIZE. I don't think interest rates are going to plummet, but if unemployment stays low, the Fed will keep interest rates stable. – P.S. If you want to hear about each of these predictions in even MORE detail, check out my newest video on my second YouTube channel, More Ryan Serhant. – Every year can be the GREATEST year of your life. Remember, markets shouldn't dictate your outcomes. They should only dictate your strategy. Ready. Set. GO!

Here's what I got wrong (and right!) about 2024. Thankfully, more right than wrong -- but there were two big surprises/misses. MISSES: 1) Total transactions will pick up moderately in 2024. What I said: “It will likely be a slog both for operations and to find deals … Still unclear how much volume we'll see, but seems likely more than 2023.” 2) Renter turnover will accelerate. What I said: My thinking was that renters had a ton of attractively priced options due to increased supply and vacancy, so turnover would continue to pick up as it did in 2023. HITS 1) Distress transactions will be a lot more buzz than reality. What I wrote: “Investors are increasingly resigned to seeing relatively little distress hit the market in 2024.” 2) SFR rent growth will NOT re-accelerate despite fewer move-outs to home purchase. What I said: "We need to stop assuming that a soft for-sale housing market equates to a booming ‘best of times’ rental market. When in history was that ever true? Never ..." 3) Multifamily values should bottom in 2024. What I said: “Values could be bottoming, and cap rates settling in the mid-5% range” on average. (Note that well-located Class A dropped back into the 4s.) 4) Cap rate spreads will widen between Class A and Class C. What I said: “I suspect well-located, new construction might not get discounted as much as buyers hope, while Class C/B- with value-add needs could be more challenged as cap rate spreads between to A to B to C normalize.” 5) Renewal rent growth will moderate as operators protect occupancy. What I said: “‘Heads on beds’ remains the strategy. Operators continue to give on price to maintain occupancy given the 50-year high in completions hitting in 2024. And diminished loss-to-lease means there’s less upside on renewals.” 6) Leasing demand will remain strong, and occupancy and rents won't crater What I said: “Fundamental demand for apartments is strong and should remain strong. Improved consumer confidence, a resilient job market plus wages outpacing rents all add up to robust demand … Not enough to keep pace with the 50-year high in new supply, but likely enough to keep occupancy levels fairly healthy and enough to avoid large rent cuts in most markets.” 7) Affordability will IMPROVE among market-rate renters signing leases. What I said: “Incomes are outpacing rents again, and likely will through at least 2024. That suggests median rent-to-income ratios (among market-rate lease signers) could soon drop back below the 23% mark.” 8) Expense growth will outpace revenue growth in 2024. What I said: “Expense growth will outpace revenue growth in a lot of markets in 2024, but the silver lining is that expense pressures are showing signs of mitigating.” 9) Apartment starts will plunge further. What I said: “New apartment construction starts plunged much more in 2023 than Census data suggests. And there's a mountain of evidence that starts could drop even further in 2024.”

Interest rate shocks, post-pandemic behavioral shifts, and banking system stress have all converged on the US real estate market. We answer 6 of the most burning questions that are top of mind right now: Q1: What are our views on housing affordability? A: Housing affordability remains extremely stressed—and right now its significantly less expensive to rent vs. own in 48 of 50 of the largest markets. Q2: Will housing supply and demand balance out anytime soon? A: The housing market is likely to remain unbalanced for the foreseeable future in part due to the “lock-in effect”—80% of owners have a mortgage rate less than 5%. Q3: Will home prices head higher or lower in 2024? A: The supply-demand imbalance should keep a floor on home prices, and we see potential for modest price increases in 2024 at a national level. Q4: Is the worst yet to come for commercial real estate? A: Although distress is likely to increase, capital remaining available from banks and PE dry powder on the sidelines should help prevent a meltdown. Q5: Could office conversions be an answer to supply issues in big cities? A: While this looks like an ideal solution on the surface, it comes with its challenges—conversion potential is likely limited to 10–15% of existing office stock. Q6: Where could we see the best opportunities in real estate? A: We see the best CRE investment opportunities in residential rentals, industrial/warehouse, and distressed real estate debt over the next several years. Read our full report from Jonathan Woloshin, CFA for more.

The Arab world’s most powerful city just made its boldest statement yet. Dubai closed $207 billion in real estate transactions in 2024 claiming the #1 spot in the Arab world and securing its place among the top global real estate powerhouses, according to Knight Frank. To understand the scale: GCC Real Estate Transaction Value – 2024 1. Dubai – $207B 2. Saudi Arabia – $75.7B 3. Abu Dhabi – $26.2B 4. Kuwait – $12.1B 5. Sharjah – $10.9B 6. Oman – $8.75B 7. Ras Al Khaimah – $4.1B 8. Qatar – $4.0B 9. Bahrain – $2.8B Dubai alone accounts for more than 53% of all real estate activity in the GCC. This is not growth this is global positioning. What’s driving this performance? 1. Population Growth Dubai’s population topped 3.65 million, growing by 100,000+ annually, driven by skilled talent, entrepreneurs, and HNWIs fueling consistent real estate demand across all sectors. 2. Foreign Investment Magnet Ranked among the top 3 cities globally for greenfield FDI in 2023, Dubai drew $12.8B+, with over 40% into real estate and infrastructure rivaling New York and London. 3. Ownership-Driven Reforms Buyers from 152+ nationalities invested in Dubai, thanks to 10-year Golden Visas, property-linked residency, and ownership laws that turn residents into long-term stakeholders. 4. Luxury and Off-Plan Surge Off-plan sales jumped +50% YoY, while prime and ultra-prime prices rose 16–25%, placing Dubai at the top of the global luxury property ladder. 5. Infrastructure and Smart Urbanism Over $100B+ invested in hard and soft infrastructure in the last 15 years: • Dubai Metro • Expo City • Dubai South • Al Maktoum Airport (world’s largest under development) • Smart city integration, AI zoning, digital land systems Dubai isn’t just building vertically it’s planning generational value horizontally. The deeper truth: This isn’t a temporary spike. It’s the result of 20+ years of consistent governance, policy innovation, and economic storytelling led by HH Sheikh Mohammed Bin Rashid Al Maktoum What makes Dubai’s success different? • It is data-backed, not hype-driven • It is policy-aligned, not market-reactive • It is future-focused, not short-term opportunistic • And it is built on trust, speed, and global relevance A City of Intent, Not Accident Dubai’s real estate dominance is not just a market headline it is a geopolitical signal. That in the middle of the Arab world, there is a city mastering what the world’s greatest cities are still chasing: 1. Vision that’s long-term 2. Governance that’s agile 3. Confidence that’s earned 4. And identity that’s proud As an Emirati youth, I don’t just see a skyline. I see a strategy. This is what it means when leadership, economics, culture, and technology align. Dubai’s dominance is the legacy of HH Sheikh Mohammed Bin Rashid Al Maktoum the leader who didn’t follow global standards, he set them. And this is why: Dubai isn’t just ahead of the region. Dubai is a decade ahead of the conversation.

Nearly $1T of commercial real estate loans mature in 2024, by far the largest amount of any upcoming year. With a large percentage of these loans underwater, creditors and debtors alike will face difficult choices in 2024. Should creditors choose to foreclose on assets, heavy downward price pressure would ensue. On the other hand, if creditors choose to modify existing loans and extend their duration out, a default cycle can likely be avoided, but would require highly capital buffers from banks as well as a writedown of the loan values to something closer to market value. There are no ideal choices here, and overall economic growth will likely be slower in either outcome - default scenario or extension scenario.

Commercial Real Estate has faced a double-barrel of headwinds coming from 1) higher rates, and 2) the work-from-home craze. Now it faces a 3rd headwind: increasing delinquencies, which of course can lead to increased defaults. But it's not that easy to see. Banks have been employing the tricks of their trade to avoid disclosing the scale and scope of the credit challenge they face. How do I know this? TDRs are going ballistic right now. TDR stands for "Troubled Debt Restructurings", also known as Loan Modifications, or Loan Mods. What happens with a TDR is the bank works out a deal with the borrower to adjust the monthly payment down, usually by offering one of 3 things: 1) a term extension, or 2) a lower rate, or 3) both. It's good for the commercial borrower because they get a more affordable payment. It's good for the bank because they can avoid reporting the loan as non-accruing or non-performing. These TDRs can continue to accrue interest. A Non-Performing Loan (NPL) no longer accrues interest. I saw some data recently on BankRegData.com which synthesizes Call Report data. The graph shows that as of Q3 2024, $9B of Non-Owner Occupied (NOO) CRE had been modified, up from only $1.3B as of Q1 2023. That's a 577% increase in modified loans, which makes up 0.77% of all NOO CRE in the US. Total NPLs in NOO CRE were 1.80% of loans as of Q3 2024, which is up from 0.54% in 2022 - a 233% increase in NPLs. But if you add all those TDRs in there, NPLs would be 2.57% of total loans. I think that from a credit standpoint it is reasonable to factor in this increase in the rate of TDRs, and comparing that to the NPL rate, when considering the credit quality of banks. If interest rates are going to stay higher for longer, it will get harder for banks to cover up this CRE problem with restructured loans. #fedpolicy #interestrates #riskmanagement

What does the future of real estate investment look like as Family Offices take center stage in capital raising? With the upcoming $84 trillion wealth transfer from baby boomers to the next generation, Family Offices are set to redefine how capital is raised, allocated, and deployed, particularly in real estate. This shift, driven by a new generation of heirs and decision-makers, is reshaping both the scale of investments and the values behind them. Real estate has always been a stable pillar for Family Office portfolios, providing consistent returns and preserving wealth. However, the next generation is prioritizing sustainability and socially responsible investments. Reports from PwC highlight emerging trends like hybrid work models and sustainable urban environments, with Family Offices funding projects such as green buildings and affordable housing. A key strength of Family Offices is their ability to invest with a long-term perspective, unlike institutional investors who often need short-term results. Despite challenges like rising interest rates and inflation, Family Offices continue to rely on real estate as a hedge against economic uncertainty. In 2024, many Family Offices are focusing on distressed assets and large-scale projects, which offer potential for growth over time. Student housing has become an increasingly attractive sector for Family Offices, offering stable demand and aligning with socially conscious investment strategies. By supporting affordable, sustainable student housing, Family Offices are able to combine financial stability with positive social impact, making this sector a key component of their real estate investments. Another trend is the shift toward direct investments, allowing Family Offices more control and alignment with their values. By cutting out intermediaries, they reduce costs and gain greater involvement in the projects they fund. Deloitte's Family Office Insights series points out that this direct approach enhances their role in real estate capital raising. The generational wealth transfer is also driving the adoption of technology. A UBS and Campden Wealth report found that 62% of Family Offices are using or planning to use artificial intelligence for real estate management. These technological tools help streamline operations and enhance decision-making, particularly in sectors like proptech, which Family Offices are increasingly integrating into their portfolios. In summary, Family Offices are shaping the future of real estate investment through their long-term approach, direct involvement, and focus on sustainability and innovation. As the $84 trillion wealth transfer progresses, Family Offices will continue to drive financial returns and social impact in sectors such as student housing, sustainable developments, and property technology. #familyoffice #familyoffices

Family Offices Are Becoming Real Estate Empires Claims suggest REITs and institutions dominate commercial real estate. The real story? Family offices are the fastest-growing buyers of direct real estate globally, and they’re playing a different game. The numbers tell the story: - 9-12% of family office portfolios allocated to real estate - 73% prefer direct ownership over fund investments - $300+ billion in family office real estate holdings globally - Average hold period: 15-20 years (vs. 5-7 for PE) - 40% increased real estate allocation in 2024 How It Happened: With multigenerational time horizons and no pressure to exit, family offices became the ultimate patient capital in real estate. They can buy, hold, and improve assets without fund lifecycle constraints. The Real Estate Model: Direct ownership: 73% prefer owning buildings outright Development: Increasingly taking construction risk for higher returns Operational assets: Hotels, senior living, student housing Trophy assets: Generational holdings in prime locations Distressed opportunities: Capitalizing on market dislocations Who’s Building: - European aristocratic families with century-old portfolios - Asian tycoons diversifying from operating businesses - Tech entrepreneurs seeking stable cash flow - Middle Eastern families deploying oil wealth - US industrialists with tax-advantaged structures The Infrastructure: Family offices are building real estate machines: - In-house asset management teams Property-level operating capabilities - Development and construction expertise - Cross-border acquisition networks - Joint venture relationships with operators Knight Frank reports family offices were buyers in 35% of major European trophy asset transactions in 2024. The Future: As interest rates normalize, family offices with dry powder are positioned to acquire distressed assets from leveraged owners. Their patient capital model is the ultimate competitive advantage. Sometimes the smartest money owns the land. What’s your real estate strategy for the next decade? References: JP Morgan 2024 Global Family Office Report: https://lnkd.in/eefRfR79 Deloitte Family Office Insights 2024: https://lnkd.in/eg2CJqFU Knight Frank Wealth Report 2024: https://lnkd.in/egYbFNC2

❓Are CRE investors playing it safe or taking risks in 2024? The latest Burns + CRE Daily survey reveals surprising trends you need to know 👇🏾 ▶️ The 1Q24 Burns + CRE Daily Fear and Greed Index survey, with responses from over 1.4K investors, shows a sentiment score of 52/100. → This reveals a market cautiously awaiting Fed decisions before making significant moves. ▶️ Despite ample capital, the percentage of investors planning to increase their CRE exposure dropped from 54% to 43% this quarter. → Investors now favor industrial and retail properties over office and multifamily investments. ▶️ By the numbers: 68% of investors plan to maintain their current CRE exposure, up from 66% in 4Q23. Only 20% increased their exposure last quarter, while 12% decreased it. Why the hesitation? → Investors believe asset values have decreased year-over-year, though the declines have moderated. Sparse transactions obscure true value changes. → An office CRE investor noted, “Pricing hasn’t changed yet. Sellers are holding out, prolonging the slow-moving market.” ▶️ Multifamily and office properties face hurdles due to high vacancy rates in central business districts. → In contrast, limited supply and strong tenant demand bolster industrial and retail asset values. The takeaway? → All eyes are on the Fed. High capital costs and expenses are impacting all CRE sectors. → Until rate cuts are confirmed, capital will likely stay on the sidelines. What will the Fed decide next? 🔗 Full link in the comments #CRE #RealEstate #Investment #MarketTrends #FedAnnouncements #IndustrialRealEstate #RetailRealEstate

Canceling remote work can’t fix the problem.   The canary in the office real estate sector is singing.   Banks that issue ~50% of US commercial real-estate loans are setting aside hundreds of millions of dollars for anticipated future losses.   New York Community Bancorp’s and Aozora Bank’s shares dropped dramatically last week exposing expectations about their office loans and what else is ahead.   Diving Valuations: Office properties are seeing unprecedented drops in value, averaging 40% and up to 50% for those revalued in 2023. [CRED iQ, 2023 Office Valuation Trends]. Shrinking Footprints: 41% of U.S. businesses are downsizing their office footprint [JLL, Office Space Planning Report, 2023]. Outstanding Loans: 74% of office commercial mortgage-backed securities (CMBS) loans—which make up 14% of the US commercial real estate lending and indicate market trends—due in 2023 have not been fully repaid. [CRED iQ, 2023 Office CMBS Loan Performance Report].   Reviewing Options: Over 1000 CMBS loans totaling $14.8 billion are now under “special servicing”--when a third party seeks an optimal outcome for the debt, such as an extension, renegotiated terms, or foreclosure [CRED iQ, "Special Servicing Report 2023]. Repurposing Requirements: Urgent responses are unavoidable to offer tangible solutions for (non-A list) office space as residential, retail, and community spaces [Urban Land Institute, Repurposing Office Buildings: Strategies for a Changing Market, 2023]. Sustainable Redesigns: Office spaces can be (and are being) transformed to embrace flexible working and sustainability, incorporating green tech and wellness-centric design [World Green Building Council, Green Building and Wellness Trends, 2023].   The traditional playbook is obsolete.   Kicking the can down the road doesn't solve the issues. They are significant AND interdependent.   Workspaces and workforces are being transformed.   It's time to embrace these shifts and innovate. #realestate #commercialproperty #rto #workforcemanagement #loans #bankingindustry #commercialpropertymanagement #workingfromhome #hybridmodel #innovation #workingremotely I advise rising leaders on workforce innovation--how to adopt human-centric modern work principles to improve results and multigenerational management.