Office space: While older office buildings (Class B and C) face challenges, there are opportunities in well-located Class A and B+ offices that may need some updates.

Industrial space: Demand remains strong, particularly around transportation hubs like ports, airports, and rail. There are opportunities for redevelopment of older industrial buildings and new developments in growth corridors.

Retail: Despite challenges, certain types of retail, such as community and grocery-anchored centers, are performing very well. High street retail is also seeing impressive sales. The top-tier malls are performing incredibly well from a sales per square foot perspective.

Multifamily: Texas, especially cities like Dallas, Houston, and Austin, continues to show strong demand. However, some markets, like Austin and Nashville, are seeing a glut of new supply of units currently which is leading to significant concessions that is impacting net effective rents that landlords are receiving. For Austin and Nashville, we view this as a short-term imbalance and have strong conviction that these two markets will be two of the best performing multifamily markets over the long-term.

Q: How are recent interest rate cuts and the Presidential election affecting investor sentiment?

A: The interest rate cuts, particularly the 50 basis point reduction followed by two smaller cuts, have positively impacted investor sentiment that the future will be better than it is today. That type of sentiment shift should lead to increased transactions and a narrowing of the bid/ask spread that exists between buyers and sellers. Additionally, the election results have created a more optimistic outlook for business overall, with some companies expanding their space requirements. This shift is contributing to greater confidence in the market, although concerns about rising Treasury yields have dampened momentum.

Q: What are the challenges related to infrastructure, taxes, or regulation that investors should keep an eye on?

A: Infrastructure, especially power availability, is a concern as the country’s energy needs grow with increased development. On the tax front, municipalities are becoming more aggressive in raising property assessments to cover budget shortfalls. These increased tax burdens can affect property ownership, making it crucial for investors to understand local tax environments before making decisions.

Q: What momentum or positive trends can investors expect moving forward?

A: Despite some recent shifts in Treasury yields, there is optimism in the market. The recent interest rate cuts have reduced uncertainty, helping buyers and sellers find more common ground on pricing. This is leading to more transactions albeit far from the 2021 and 2022 transaction levels, which is healthy for the market. Investors can expect increased activity in early 2025 as the market stabilizes and more transactions take place.

Q: Did the Fed’s actions achieve their goal of managing the economy, and will the interest rate cuts help avoid a major disruption?

A: Time will tell on this. The Fed’s goal was to balance economic growth while keeping inflation in check. Finding this equilibrium is challenging, and the Fed will continue to monitor the economy closely.

Q: How should investors, owners, or developers approach the changing landscape? What strategies should they consider?

A: The key is to focus on market fundamentals—understanding supply and demand trends. While high interest rates can reduce flexibility, investors should look for opportunities where market dislocation has created strong buying opportunities. Even in markets where values are temporarily down, there may be long-term growth potential. It’s essential to remain patient and capitalize on opportunities as they arise, especially in growth markets. A focus on areas with long-term growth potential and lower risk will continue to yield positive returns over time.