2024 Winter Issue of Urban Land - 82

EMERGING TRENDS BAROMETER 2024
Source: Emerging Trends in Real Estate survey.
Note: Based on U.S. respondents only.
shift toward more flexible work is contributing
to a bifurcated office market and challenges
for downtowns and central business districts. A
significant share of the existing office inventory is
functionally obsolete and will need to be repurposed
or demolished to make way for new uses.
It's all about the debt. Commercial real estate
capital has become scarce and expensive, making
it more difficult to pencil out acquisitions and
development projects. Distress levels remain low,
but a looming wall of loan maturities may create
a tipping point for some assets and owners. The
Mortgage Bankers Association estimates that more
than $725 billion of commercial and multifamily
mortgages mature in 2023, with another $1.2 trillion
maturing over the following two years, representing
more than 40 percent of outstanding commercial
real estate mortgages.
Eco-anxiety comes home. Climate risk issues that
have been percolating in the background for years
have become increasingly urgent amid extreme
weather-related events. During the past five years,
the U.S. average of billion-dollar climate events
that occur annually has risen to 18. That increase is
resulting in higher insurance premiums alongside
greater risk of loss and operating challenges for
owners and operators.
More pressure on affordable housing. After
double-digit rent escalations last year, rent growth
has eased in the near term due to a large supply
of new inventory. However, mortgage rates have
doubled, which is pushing homeownership further
out of reach and slowing home sales. According to
the National Association of Realtors, the share of U.S.
households that can afford a median-priced home is
at its lowest point in almost 40 years.
Portfolio pivot. Recent shifts in both property
and financial markets are upending long-established
norms about how commercial real estate portfolios
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URBAN LAND WINTER 202 4
should be constructed. Fund managers are rethinking
traditional " core " strategies. They're reducing
exposure to office and to top-tier malls, and they're
increasing their focus on alternative sectors-such as
storage, student housing, and life sciences-that offer
more compelling returns.
Not remotely the same. The percentage of
people who report working remotely in the U.S.
has almost tripled, relative to pre-pandemic trends.
The stickiness of remote and hybrid work has farreaching
effects across property sectors, changing
demand for the amount and type of office space,
altering migration patterns, and influencing the kinds
of housing people want. This factor also affects
household formation rates, and where people shop
and eat. In many parts of the country, it is also
sapping the vitality of downtowns.
Downtowns need to reinvent themselves ... again.
Downtowns are home to a disproportionate share
of empty office buildings. Opinions are mixed on
the future of America's cities, in part because not all
cities or regions of the country are experiencing the
same trends. Some central business districts (CBDs)
are struggling, even as their urban neighborhoods are
thriving. What's clear is that cities will need to take
action to address key issues, including obsolete office
buildings, crime and safety, and cities' ability to fund
key infrastructure.
An artificial boom? Embedding artificial intelligence
(AI) into the real estate life cycle shows great
potential for both cost and resource efficiency, while
also being a positive step forward in the industry's
sustainability. The exciting potential includes
probabilistic models to help predict property climate
risks, identify investment opportunities, and construct
higher-performing portfolios. Yet uncertainty exists
around how AI could directly affect demand
for space.
2024 Winter Issue of Urban Land

Table of Contents for the Digital Edition of 2024 Winter Issue of Urban Land
