2024 is set to be a defining year for commercial real estate (CRE) as the industry continues to transform to meet post-pandemic demands and a challenging economic market. Looking ahead, property owners and investors should expect the roller coaster experiences of recent years to persist, opening the door for creative solutions and cost-saving measures. Following are the key commercial real estate trends to watch in the new year.
New incentives projected to spur office-to-residential conversions
With almost 1 billion square feet of unoccupied office space in the U.S., competition for tenants is high. For their part, tenants are consolidating space to align with hybrid work strategies and opting for higher-quality properties, causing increasing pressures to raise property taxes. That leaves commercial property owners and investors to consider their options to upgrade the office class or convert the space to other uses that may have more value than office and retail.
Right now, conversions can be difficult due to financing, zoning restrictions and building regulations. However, legislators see an opportunity to address the shortage of affordable multifamily housing by facilitating the conversion of office space. For investors, multifamily properties continue to create profitable opportunities when keeping a pulse on economic and risk-related trends, especially when considering state budget gaps.
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