John D’Angelo, Real Estate Solution Leader at Deloitte, joins America’s Commercial Real Estate Show host Michael Bull to share highlights from their (Deloitte’s) 2024 Outlook Survey. He notes that commercial real estate players tend to be optimistic by nature, but that they were not so much this time, with revenue growth expectations the most pessimistic ever. About 40% plan to cut expenses in the coming year versus 6% a year prior.
The Discussion: Unveiling Insights; 2024 Commercial Real Estate Outlook with John D’Angelo, Real Estate Solutions Leader at Deloitte
Introduction:
In a recent conversation, Michael brings John D’Angelo, Real Estate Solutions leader for Deloitte, to discuss the highlights of the 2024 Commercial Real Estate Outlook report. The theme of the report revolves around “Finding Tera Firma,” providing a comprehensive view of the commercial real estate industry’s current landscape.
Survey Methodology and Participants:
John reveals that the report is based on insights gathered from 750 real estate CFOs worldwide, representing diverse regions such as North America, Asia Pacific, and Europe. The survey delves into various aspects of the commercial real estate market, including business outlook, technological adoption, and concerns faced by industry leaders.
Pessimistic Revenue Outlook:
One notable finding from the survey is the increased pessimism among CFOs regarding revenue outlook. A significant 60% of respondents anticipate declining revenue in the next 12 to 15 months, marking the most pessimistic response in the history of the survey.
Impact of Economic Factors:
The conversation touches upon the impact of economic factors, such as the rapid increase in interest rates by the Federal Reserve. This has led to real estate CFOs adjusting their spending plans, with 40% planning to cut expenses in the coming year.
Technology Adoption and Spending:
John highlights a decline in technology adoption and spending, attributing it to the commercial real estate industry’s need to catch up on technology-related debt. Despite economic challenges, technology spending remains relatively stable, emphasizing the necessity of ongoing technological advancements in the sector.
Opportunities and Challenges:
The discussion extends to potential opportunities in the market, such as adaptive reuse of functionally obsolete properties and the increasing demand for digital real estate, including data centers and single-family rentals.
Risks and Readiness:
The CFOs express concerns about cyber risks, indicating a growing awareness of the vulnerabilities introduced by advanced technologies. Additionally, the survey reveals a decline in companies claiming to be fully modernized and ready for technological advancements. Furthermore, there’s a notable lack of readiness for Environmental, Social, and Governance (ESG) reporting.
Office Space Dynamics:
The conversation explores the challenges faced by office space dynamics, with a focus on uncertainties surrounding when office demand will rebound. Real estate CFOs reveal a shift in their perspectives, with some considering expense cuts in office space and talent-related actions.
Liquidity Challenges:
John provides insights into the liquidity challenges faced by the market, with banks cautious about commercial real estate lending and private debt becoming a potential avenue for financing.
Conclusion:
As the conversation concludes, John emphasizes the resilience of the commercial real estate market and encourages industry players to identify opportunities amid changing market dynamics. The report serves as a valuable resource for understanding the current state of the commercial real estate sector in 2024.
More posts featuring John D’Angelo of Deloitte can be accessed here.