CRE Finance May Have Hit Bottom in 2023. What’s Next?
Commercial Observer asked top industry leaders to opine on where debt and equity capital is going in 2024. In mid-December 2023, Federal Reserve Chairman Jerome Powell announced that the federal funds rate — the benchmark, short-term interest rate — would remain at 5.25 to 5.5 percent for the foreseeable future, and indicated that as many as three rate cuts could be in store in 2024. This rate move could signal a new paradigm for the CRE debt and equity landscape. Josh Zegen, co-founder and managing principal at Madison Realty Capital, said that the settling of interest rates will drive demand for equity next year, but the development market, for the most part, is still “locked” due to elevated interest rates. “The long-term rates have come down, but floating rates are still very high,” Zegen said. “Typically construction lending is at floating rates, so that will take some time to settle in before people are building in a big way.”
