The State of U.S. Capital Markets: 4Q24 Insights and What It Means for CRE Investors

The latest Newmark 4Q24 U.S. Capital Markets Report sheds light on crucial trends shaping commercial real estate (CRE). As we head into 2025, investors, lenders, and developers must navigate an evolving landscape marked by economic resilience, shifting capital supply, and changing investment dynamics. Here are the key takeaways from the report and what they mean for CRE stakeholders.

Economic Outlook: Stability Amid Uncertainty

The U.S. economy showed remarkable strength in 4Q24, with GDP growth reaching 2.8%. Unemployment remained stable at 4.1%, while inflationary pressures persisted slightly above the Federal Reserve’s target. Market expectations for interest rate cuts have settled at two reductions in 2025, but long-term treasury yields continue to fluctuate between 3.7% and 4.6%.

Debt Capital Markets: A Gradual Recovery

CRE debt origination increased 15% year-over-year, indicating a recovery, though still below pre-pandemic levels. The market is bracing for $2 trillion in maturing debt between 2024 and 2026, with approximately $542 billion categorized as “potentially troubled.” Office and multifamily sectors face the greatest refinancing challenges due to rising interest costs and shifting lending standards.

Banks remain cautious, tightening their lending standards and retreating from long-term loans.
Private lenders and securitized markets (CMBS, SASB) have filled the financing gap.
Loan extensions have delayed distress, but an increase in troubled assets is expected in 2025.

Equity Markets: Signs of Life in Investment Sales

Investment sales volumes rose 6% year-over-year, with office transactions surging 65% quarter-over-quarter—a sign of growing investor confidence.

Small transactions under $100M made up 66% of all deals, emphasizing liquidity at the lower end of the market.
Institutional investment grew 28%, particularly in office and multifamily assets.
Foreign investment remained below historical levels, but activity picked up in Q4.

Supply of Capital: Dry Powder Waiting for Deployment

Dry powder at closed-end funds remains high at $328 billion, though down 12% from 2022 levels. Institutional investors are cautiously re-entering the market, focusing on industrial, multifamily, and distressed asset opportunities.

Pricing and Returns: Cap Rate Spreads Narrowing

Transaction cap rates have stabilized, though they remain historically tight compared to debt costs. Industrial and retail have shown resilience, while office valuations continue to adjust downward.

Key Takeaways for CRE Investors

Distress will unfold gradually, presenting opportunities for well-capitalized buyers.
Multifamily and industrial sectors remain strong, while office distress continues to mount.
Liquidity is returning, particularly in smaller deals and private capital transactions.
Cap rates are still adjusting, requiring investors to remain patient and disciplined.

As we enter 2025, the CRE market presents a mix of challenges and opportunities. For investors looking to capitalize on shifting dynamics, strategic positioning, and thorough market analysis are crucial.

🔹 Want the Full Report? Download the complete Newmark 4Q24 U.S. Capital Markets Report for an in-depth breakdown of market trends and data-driven insights.

Let’s strategize your next Michigan Commercial Real Estate move! Contact me today at 248-705-9115 or Larry.Emmons@nmrk.com, and let’s discuss how I can help you navigate your small market for big results.