Multifamily, Industrial Sectors Drive Activity in Q4

Investors in commercial real estate have taken a solid approach to the November election and interest rate cuts after a burst of activity in September. According to the LightBox CRE Activity Index, while market fundamentals remained mixed in October, high-demand sectors like multifamily and industrial continued picking up steam despite a modest 2.3-point dip to 95.9 from September.

The fall in commercial real estate activity comes as investors mull the economic landscape following November’s election and the potential for additional cuts to interest rates later this year, but LightBox said that activity was still significantly higher than a year ago.

“After a slow start to 2024, some investors are actively shopping for opportunities while others are waiting until later in the rate-cutting cycle,” the report said. “There are also signs of the lending wheels beginning to turn, but it will likely take several more rate cuts for the debt market to show any significant signs of improvement. Property prices are also beginning to stabilize and even rise in some sectors, marking a significant pivot point in the market cycle and signaling to investors that the time to move may finally be here.”

Environmental due diligence activity, which tends to signal that underwriting for potential deals is underway, particularly for year-end transactions, ticked up 5% in October. Meanwhile, property listings, which surged in September, leveled off. LightBox said it is likely that activity in the debt space will pick up after several additional rate cuts, while appraisal activity in support of refinance activity is likely to continue as rates trend down and commercial loans come due.

October saw a round of high-value transactions and an uptick in office leasing, particularly as companies like Amazon enforced return-to-office policies and others re-evaluated their footprints as leases approached expiration. This momentum, according to LightBox, suggests that demand for office space may be stabilizing, even as investors continue a cautious approach to dealmaking.

Multifamily and industrial properties, which comprised 51% of listings on LightBox’s RCM platform in Q3, are expected to lead activity into Q4 as buyer and seller expectations increasingly align.

Looking ahead, the firm said it anticipates a stronger fourth quarter as additional interest rate cuts fuel renewed interest in refinancing and new acquisitions. Signs of capital deployment in multifamily and industrial markets point to a busier end of the year, with activity levels approaching those seen in 2019.