U.S. Capital Markets overview

Q1 2024

Q1 2024 U.S. Capital Markets trends highlight the challenges and shifts within the landscape amid a backdrop of elevated interest rates and changing lender dynamics. Debt origination in the market has significantly contracted, registering more than 48% below Q1 2023 levels, attributed mainly to the rising cost of refinancing assets. This contraction is set against a backdrop of a large volume of loans maturing within the year, suggesting a potential increase in transactional activities ahead. The traditional lending mechanisms, particularly regional bank lending which previously fueled capital markets lending cycles, have nearly ceased without a visible alternative on the horizon. This halt in lending activities has opened opportunities for opportunistic buyers, amidst a cautious environment where institutional investors have pulled back due to heightened sensitivity towards the cost of capital.

Investment sales across all property types have hit their lowest Q1 volume since 2010, affected by the dual pressures of rising interest rates affecting asset valuations and specific structural challenges within the office sector. Lenders' inclination towards short-term mortgage extensions has delayed necessary price corrections, further stalling sales activities. Despite these market constraints, there is an abundance of dry powder, primarily within opportunistic or value-add investment vehicles, ready to be deployed. For instance, Blackstone has raised $30 billion for the largest real estate fund ever, aiming for opportunistic investments. This significant fundraise, targeting internal rates of return over 20%, underscores a broader market sentiment betting on a rebound in pricing contingent upon future interest rate cuts, pointing towards a cautious yet opportunistic outlook for the CRE market in the near term.

Change in Debt Origination relative to 2023 YTD.

Commercial real estate debt origination remains challenged in light of elevated interest rates. While 2024’s YTD $56.04 billion is well behind 2023 Q1 levels, the amount of active lenders is also significantly down. There are a myriad of reasons for this, such as overexposure to troubled assets, but this has paved the way for opportunistic buyers to take advantage of the conditions. A looming issue to monitor is the regional bank lending mechanism, which largely drove CRE lending over the last cycle, has virtually shut down, with no clear alternative in sight. 


Change in Investment Sales volume relative to 2023 YTD.

Equity markets, much like debt markets, remain a heavily challenged environment, and the 2024 YTD total of $29.64 billion in investment sales shows suppression across the board that is not limited to office. Notably sidelined are institutional investors, likely due to the increased sensitivity as it relates to cost of capital. 


Dry powder at close-ended funds with a vintage from 2014-2024.  

The amount of dry powder that is ready to be deployed sits overwhelmingly in the opportunistic or value-add vehicles, with Blackstone raising $30 billion in the largest real estate fund ever, specifically for opportunistic investments. An overwhelming majority of these opportunistic funds are targeting IRR’s over 20% which would indicate a heavy bet on a rebound in pricing as interest rates are cut. 

For more information, contact:

Alex Ern

    • Regional Manager, Mid-Atlantic
    • Capital Markets Group
    • Market Intelligence
[email protected]