CBRE: Available retail space will decline in 2024, despite promised rate cuts
Despite retail center developers who are eager to pick up construction with the Federal Reserve’s promise to cut rates next year, one of the world’s largest retail services companies predicts that cranes and backhoes will remain quiet in 2024.
In its just released “2024 U.S. Real Estate Outlook,” CBRE foresees retail availability rates continuing to decline by 20 basis points to 4.6%, the lowest rate recorded since real estate service and research firms began tracking it nearly 20 years ago.
CBRE foresees retail spending moderating to 2.6% in 2024 from 4.4% in 2023, and net absorption –new demand for retail space – declining to 28 million sq. ft. from 35 million sq. ft. a year earlier.
One retail sector that CBRE researchers predict will remain aggressive in expanding, however, is luxury goods. Brands that include Gucci and Hermes have been active in expanding their footprints to underserved major metros such as Columbus, Houston, Phoenix and Atlanta.
Improving financial conditions will keep store traffic bustling, though, the report notes.
CBRE’s economists anticipate that resilient consumer spending will counter economic headwinds next year. They predict that an unemployment rate rising slightly to 4.5% and an easing of inflation will allow the Fed to reduce short-term interest rates to around 4.25% by the end of 2024 and 3.5% in 2025.
An anticipated economic bottoming out will affect all sectors of commercial real estate, the report predicts. CBRE sees lending remaining tight and property values declining in the first half of the year before activity rebounds in the second half.
“There is a bit more real estate pain ahead, but stabilization and the early stages of recovery aren’t far behind that,” said CBRE’s global chief economist and head of research Richard Barkham. “Investment volumes will be down overall for 2024 but will start an upturn in the second half. And leasing activity will pick up a bit from a sluggish 2023.”