2024 Commercial Real Estate Outlook (CRE)

Continuing to confront multiple challenges and shifting expectations, in 2024, the global real estate industry has an opportunity to start rebuilding on more solid ground. Multiple factors, from a pandemic-era recovery that shifted how and where people work to more recent geopolitical uncertainties and financial market instability, the coming year is expected to be pivotal in real estate firms’ ability to recover and build up. Marked by a myriad of mixed signals about the health and trajectory of our industry, real estate leaders may need to find their footing as they shape the next phase of real estate ownership and investment. The coming 12 to 18 months are expected to be important as real estate firms reposition themselves, and it might take a combination of critical realizations and strategic realignments, some far different from the status quo, to get there.

This year’s commercial real estate outlook aims to help leaders find terra firma – solid ground – that the industry can build upon to meet new foundational realities.

The Deloitte Center for Financial Services conducted a survey of 750 CFOs and their direct reports at major commercial real estate owners and investment companies around the world. Respondents were asked to share their opinions on their organizations’ growth prospects and workforce, operations, and technology plans through 2024. We also asked about their investment priorities and anticipated structural changes for the coming 12 to 18 months. Respondents were distributed among three regions: North America (the United States and Canada); Europe (the United Kingdom, France, Germany, the Netherlands, and Spain); and Asia/Pacific (Australia, Japan, Mainland China, and Singapore). The survey included real estate companies with assets under management of at least US$50 million and was fielded in June 2023.

• Expense mitigation is a top priority for most respondents; revenue expectations dropped to their lowest level since we began our survey in 2018. Top areas for expense mitigation are in talent and office space.
• Respondents point to cost of capital and capital availability as the weakest among real estate fundamentals. About half of respondents expect cost of capital (50%) and capital availability (49%) to worsen through 2024, up from 38% and 40%, respectively, last year.
• Many real estate firms aren’t ready to meet environmental, social, and governance (ESG) regulations. Nearly 60% surveyed say their firms lack the data, processes, and internal controls necessary to meet compliance standards.
• Most respondents say they plan to use outsourcing to drive efficiency. Their primary goals are gaining technological capabilities to streamline processes and adding agility and resilience to their operations.
• Real estate firms should address years of amassed technical debt by ramping up technology capabilities. Most respondents (61%) admit their firms’ core technology infrastructures still rely on legacy systems, but nearly half are making efforts to modernize.