Real Estate Trends Shaping the Market
The real estate industry is always evolving, and 2024 is expected to be no different. Here are a few of the trends that are likely to shape the market in the coming year:
1. Continued Impact of the Pandemic
The COVID-19 pandemic continues to have a significant impact on the real estate industry. The rise of remote work has led to increased demand for homes in suburban and exurban areas, while also putting a damper on the office market. In 2024, we can expect to see these trends continue, with a growing focus on livability and sustainability in residential real estate, and a continued struggle for office landlords to find tenants.
2. Rising Interest Rates
Interest rates are expected to continue to rise in 2024, which could lead to a slowdown in the housing market. This could make it more difficult for buyers to qualify for mortgages, and could also put downward pressure on home prices. However, it is also possible that rising interest rates could lead to a surge in demand from buyers who are looking to lock in a lower rate before prices go up even further.
3. Focus on Sustainability
Sustainability is becoming an increasingly important issue for both consumers and businesses for a variety of factors, including rising energy costs, growing concern for climate change and governmental incentives, including opportunities for tax deductions and credits (e.g., Section 179D and Section 45L), for businesses and homeowners to invest in sustainable properties. In 2024, we can expect to see a continued focus on green building practices and energy-efficient homes. This could lead to increased demand for homes with solar panels, energy-star appliances and other green features.
4. Technological Innovation
Technology is continuing to transform the real estate industry. In 2024, we can expect to see even more innovation in areas such as virtual reality tours, artificial intelligence-powered property valuations, and blockchain-based real estate transactions. These technologies have the potential to make the buying and selling of real estate more efficient and transparent.
5. Rise of the Single-Family Home
The single-family home market has been one of the bright spots in the real estate industry in recent years, and this trend is expected to continue in 2024. With more people working from home, there is less of a need to live in close proximity to an office. This has made single-family homes in suburban and rural areas more appealing. The supply of single-family homes on the market is still relatively low, which is helping to keep prices high. Also, build-to-rent (BTR) housing should continue to trend in 2024, where single-family homes are built for the sole purpose of renting. BTR single-family housing is expected to be more popular in certain geographic areas in the Southeast, and particularly in Metropolitan Atlanta.
6. Decline of the Office Building
While single-family homes are on the rise, the office building market has been struggling in recent years, and this trend is expected to continue in 2024. As mentioned above, the rise of remote work is having a significant impact on the office building market, as well as the fact that lending is becoming increasingly more difficult to obtain for office deals. With fewer people going into the office, there is less demand for office space. Additionally, co-working spaces are becoming increasingly popular, as they offer a more flexible and affordable alternative to traditional office space. Even for those who do need to go into an office, the way people work in the office is changing. Open floor plans and shared workspaces are becoming more common, which means that less office space is needed per employee.
7. M&A Opportunity
While dealmaking in the real estate industry continues, uncertainty in the M&A market still remains due to increased regulatory activity and higher interest rates. Investor appetite seems prevalent in areas such as digital/technology, affordable housing and wellness. Patience and an opportunistic wait-and-see approach can help investors find optimal deals, particularly for entities prime for innovation and transformation.
8. ESG Reporting and the Corporate Sustainability Reporting Directive (CSRD)
On Jan. 5, 2023, the CSRD went into effect as law, requiring all listed companies and most large companies to disclose information regarding what they view as risks and opportunities arising from social and environmental issues, as well as the impact of their activities on people and the environment. While the CSRD is an EU reporting rule, it still applies to any U.S. and other non-EU companies with EU businesses, who will still be required to produce ESG reports in compliance with the CSRD, even if those companies are not listed on a European exchange. The CSRD also has the potential to become a standard by which companies are evaluated, and private companies without ESG disclosures could be at a competitive disadvantage. ESG could also become a more meaningful component of M&A transactions.
Windham Brannon Can Help
Windham Brannon’s Real Estate Practice can help you assess how trends in the industry impact you and your business, consumers and stakeholders. Whether you need tax planning, M&A support or strategic advisory for future growth, our professionals can work with to not only keep pace with shifting trends in real estate, but also look for meaningful opportunities. For more information, contact your Windham Brannon advisor today, or reach out to Micah Greenberger.
