Highlights from last week's CREFC conference in Miami...
General outlook for 2024:
-- Optimism for a more stable year in commercial real estate.
-- Primary challenge 1: Distressed transactions
-- Primary challenge 2: Valuation uncertainty.
-- Alternative lenders/private credit providers may benefit.
-- Many expect a pickup in agency volumes.
-- Bank deposits expected to stabilize.
-- Commercial mortgage delinquency rates up but contained.
-- Most lenders remain focused on legacy issues.
Interest rate outlook:
-- Divergent views on the U.S. 10-year Treasury yield in 2024.
-- BOA predicts 3.1%.
-- Crowd-sourced vote sees it at 3.5% to 4.0%.
-- Lots of talk about three 25-bps interest rate cuts in 2024.
CMBS loans:
-- Lots of office distress.
-- Multifamily to have problems due to aggressive underwriting.
-- But low expected loss severity on defaulted multifamily loans.
Other
-- Multifamily conversion talk > action
-- Lots of talk about housing shortages but few solutions
-- SEC's climate disclosure proposal remains controversial.
Our takeaway: The most important trend defining commercial real estate finance is falling interest rates. Full stop. Coupons are down 10-20% across the board, which provided some much-needed relief.
More relief to come in 2024, more volatility, or new highs?
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