by Ron Holmes –
2024 Could Be Rough for Some
There were negative events occurring in the last quarter or so of 2023 that suggest 2024 could be a rough year for the commercial real estate market. Locally, WeWork announced it is shuttering more Dallas locations. Nationally, JER Investors Trust Inc. (a New York REIT) filed for Chapter 11 after nearly $1.25 Billion in losses on mortgaged-backed securities investments.
One would think mortgage-backed securities with office and retail properties as the underlying assets might be in for trouble in 2024.
The move towards laws restricting certain foreign investment in U.S. real estate assets may well stem the tide of foreign investment dollars. There is also a movement to regulate family offices (and therefore private equity funds) that may chill the private equity market.
2024 Could Hold Opportunities for Others
But there is good news.
Whenever the real estate market contracts and banks reduce their direct real estate exposure, private lenders and investors fill the gap. Some may take the form of opportunistic private funds that scoop up distressed assets. Some may take the form of private lending for development or refinancing through preferred equity financing (think mezzanine debt) to fill the gap between a reduced senior loan and the investor’s capital. And others may take the form of the acquisition of loan portfolios from failing banks.
Hopefully, new regulations will not significantly impact private dollars.
2024 is an election year and, typically, the uncertainty about a potential new administration creates a cautious approach in the real estate market. This election year may be different as the leading candidates are both known quantities (assuming one of the current leading candidates prevails). Those choices, however, may not be appealing to either side of the aisle.
Cash Could Be King in 2024
I think we can safely assume the first half of 2024 will see anything but a bullish market in commercial real estate, except perhaps in the opportunistic arena, and that may well carry forward through the end of the year. 2024 is probably not the year to expect a whirlwind of traditional activity, but maybe one where opportunities do abound if private equity is bountiful.
I’ve heard a lot of talk about big guns being loaded with cash opportunities. Let’s hope those opportunities abound and the loaded guns start shooting.
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About Ron Holmes
His real estate law practice is as broad as it is deep. Mr. Holmes has served as lead counsel on real transactions all across the United States (more than twenty States), representing public and private companies, both domestic and international, in all manner of real estate transactions, including large scale multi-use land developments and high rise residential condominiums, to acquisitions and sales of operating property portfolios, office, industrial and retail leasing and virtually every other form of real estate development, construction, financing, investing and leasing.Learn more about Ron…