U.S. Capital Markets overview

As we reach the halfway point of 2024, the broader capital markets environment is showing signs of resilience and adaptability despite some macroeconomic uncertainties and a disconnect between buyers and sellers regarding property valuations. Debt origination has decreased by approximately 24% year over year, a substantial improvement from Q1 2024, where it was down 48%. This positive trend is expected to continue, especially with the anticipated increase in transactional activity due to pending loan maturities. Lenders have demonstrated flexibility with workouts and loan modifications, creating opportunities for future growth. Additionally, regional banks' liquidity issues are being mitigated as alternatives like CMBS gain traction among borrowers.

Investment sales across major property types are down 32% year over year, yet this marks a significant improvement from Q1 2023, where volumes were down 54% YoY. The investment market, while currently subdued, is showing promise with several large M&A trades in 2024, such as Blackstone's $10  billion acquisition of AIR. These high-profile transactions indicate a potential market rebound, as large institutional acquisitions often signal market valuation lows. There is also a substantial amount of capital ready for investment, particularly in opportunistic vehicles targeting distressed assets below replacement cost.

The sector is filled with cautious optimism as the Fed considers rate cuts later in 2024. Many financial institutions are beginning to price this into their outlooks, which could significantly relieve pressure on the broader commercial real estate market in the near term. Overall, the outlook for the capital markets environment is increasingly positive, with many signs pointing toward a period of growth and recovery.