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  • Writer's pictureStacy Patrick

December Commercial Real Estate Newsletter




 




What's in this issue?


> Forecasting 2024: What's in the cards for commercial real estate?

> Life Sciences are primed for a comeback

> Amazon warehouse gets robotic update for speedy deliveries




Forecasing 2024: What's in the cards for commercial real estate?


High interest rates, tighter lending and vacant office buildings dominated the commercial real estate headlines throughout 2023. How will these market conditions set the stage for 2024?


1. High occupancy fuels demand for CRE properties


Every sector in commercial real estate is forecast to drive high demand and high occupancy rates, apart from office facilities. The appetite for warehouse, retail and multi-family development is showing no signs of abating.


2. Time to acclimate to higher interest rates


Will interest rates recede from their 20-year high in 2024? Unlikely. Inflation is showing signs of stabilizing or even declining in 2024. However, investors and property owners are advised to strategize and adapt to this high-interest environment, according to a forecast from Urban Land Institute and PwC.


3. Labor and material costs challenge construction


Persistently high material costs and an ongoing labor shortage will continue to create obstacles in real estate and development.


4. Retail accelerates as hometown markets improve


Retail is shifting in response to the traffic and buying patterns emerging from the hybrid workforce. As these workers run their errands closer to home, Class A malls and grocery-anchored retail centers enjoy high occupancy rates.


5. Sunbelt market gathers steam


Warm weather metros, including Nashville, Houston, Atlanta, Las Vegas and Phoenix, will continue their influx of new residents, businesses and investors drawn to their mild winters and low taxes.



 

Life sciences are primed for a comeback


The reports of its death are greatly exaggerated: Life sciences are positioned to bounce back in 2024, due to two driving factors.


Higher occupancy: Available square footage has fallen by more than half in the top biotech markets, from 25 million square feet to 10 million square feet. Top three real estate markets for life sciences are: Boston, San Francisco and San Diego. Washington, D.C.; Raleigh-Durham, North Carolina; New Jersey; New York City; Boulder, Colorado; Philadelphia and Seattle fill out the remaining top 10.


VC firms are flush with cash: Since 2021, the top 20 life science venture capital firms have raised more than $22 billion, creating a runway for startups and mergers developing medical devices, innovative therapeutics and biomanufacturing processes.


Biotechs must show their work: But this fuel for growth comes with a significant caveat. Now that financing is more expensive due to rising interest rates, venture capitalists will want to see promising results in clinical trials before agreeing to fund the next phase of growth.


In the long term, these trends can create steady growth in the life sciences real estate market. With the bar set even higher for emerging life sciences firms, these companies will enter the market with vetted, viable solutions. That makes them stronger, steadier tenants.


 



Amazon warehouse gets robotic update for speedy deliveries


Amazon warehouse deploys robot intelligence to boost throughput.

An Amazon warehouse in Houston is test driving a new artificial intelligence system designed to improve inventory management and speed up order processing. “Sequoia” uses mobile robots and robotic arms to identify, store and process orders.


 

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