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Anticipating improved credit conditions as interest rates fall later this year, investors are set to purchase more commercial real estate in 2024, according to the latest U.S. Investor Intentions Survey from CBRE.

About half of the investor respondents reported that they expect both their own transaction activity as well as that of the broader commercial real estate market to recover in 2024’s second half.

“However, we expect this may occur earlier if the 10-year Treasury yield declines more quickly than expected,” noted CBRE. “CBRE forecasts that the 10-year yield will fall to 3.6% by year-end.”

The survey, which covers all asset types, found improved investor sentiment: Over 60% of respondents said they plan to expand their real estate portfolios this year compared with 16% in the prior year’s survey.

According to CBRE, among investor types, developers, private equity funds, real estate funds, and REITs plan to purchase more assets than other investor types. In addition, even though property values are lower, 40% of investors plan to sell more assets in 2024 compared with 14% in the prior year’s survey. Private equity and real estate funds indicated they are also likely to sell more this year than other investor types.

“While credit conditions remain challenging, investors are looking beyond the current difficulties. We expect investment activity to gain momentum in the second half of the year as financial conditions improve,” said Chris Ludeman, global president of capital markets for CBRE. “Investors are particularly focused on opportunities and core-plus strategies as they seek higher risk-adjusted yields.”

The survey found that the multifamily as well as industrial and logistics sectors remain the most sought-after commercial real estate asset classes. For multifamily, 90% of investors prefer Class A communities, and nearly half prefer Class B and C value-add communities. Industrial and logistics investors favor Class A facilities in major markets. For retail, investors show a preference for grocery-anchored centers, while office investors are seeking prime/trophy properties.

Large Sun Belt cities and high-performing secondary markets remain hot for property investments this year. Dallas tops the list of the most preferred investment markets for the third consecutive year, followed by Miami; Raleigh, North Carolina; Atlanta; Nashville, Tennessee; and Charlotte, North Carolina. The gateway cities of Boston, New York, and Washington, D.C., are also on the list of top performers for property returns.

According to CBRE, pricing discounts are anticipated across all sectors. However, the survey found grocery-anchored retail centers to have the smallest pricing discounts. For multifamily as well as industrial and logistic assets, discounts are expected to be less than 10%. Investors anticipate value-add office assets and shopping malls to offer the most significant discounts.