For the week of Dec. 16th-20th
Leading the week’s news was the Fed’s third interest rate cut for the year. A surprise to the upside came in the form of revised GDP data for Q3 and the latest inflation reading brought the slowest monthly increase in seven months. In metro news, Dallas took the top spot in the year’s industrial sales volume, and Boston made headlines as a hot office leasing market in Q3.
We hope you’ve enjoyed following our Avoid the CRE FOMO weekly blog since we launched it in August. As 2024 wraps up, here’s our final top 5 list (for the year) of the biggest weekly CRE news stories—and why they matter.
- Fed Makes Third Rate Cut of the Year
The biggest headline of the week, of course, was news that the Federal Reserve lowered the federal funds rate by 25 basis points (bps) today—to almost no one’s surprise. The third rate cut of the year brings the rate to a range of 4.25% to 4.50%, as the Fed monitors the delicate balancing act between economic growth and persistent inflation.
Why It Matters: More interesting than the expected 25 bps cut was this week’s commentary signaling that the Fed will reduce interest rates at a slower pace in 2025. The 10-year Treasury yield is hovering above 4%, reflecting the market’s concerns about high deficit spending and inflationary pressures. As long as inflation remains in check, the Fed is penciling in a few more moderate rate cuts in 2025.
- Dallas Leads 2024’s Industrial Sales
At LightBox’s May 2024 PRISM conference, JLL’s Dallas expert Torrey Littlejohn highlighted why Dallas is a shining star in CRE, including above-average popular growth, the strong presence of Fortune1000 headquarters, and its diverse economy. Now, at the close of 2024, it’s no surprise that Dallas leads the year’s industrial sales activity. In the first 10 months of 2024, industrial sales topped $3.8 billion, an increase of $1.1 billion over 2023. Behind Dallas are the Bay Area ($3 billion), Chicago ($2.6 billion), and Houston ($2.6 billion).
Why It Matters: LightBox EDR’s ScoreKeeper model ranked Dallas as the second-fastest growing MSA in the U.S. for pre-transactional Phase I ESA activity, behind Atlanta. Adding to this metro’s appeal, PwC/ULI ranked Dallas as the top market to watch in CRE in 2025 in its latest Emerging Trends in Commercial Real Estate report. Investors with capital will continue to focus attention on metros like Dallas that offer strong opportunities for investment and development, driven by a strong economy and above-average population and employment growth.
- Inflation Reading Slowest Since May
On the heels of last week’s consumer and wholesale inflation data (CPI and PPI) which pointed to a somewhat concerning acceleration in price growth, this week’s Personal Consumption Expenditures (PCE) index rose less than expected. The PCE index, the Fed’s preferred inflation measure, increased at an annual rate of 2.4% last month, a tick higher than 2.3% in October. Excluding the volatile food component, the index rose a modest 0.1% above October, marking a slowdown from the 0.3% monthly increases of September and October, and notably, the slowest monthly rise since May.
Why It Matters: The news offered some reassurance about inflation and future interest rate cuts as the Fed is expected to closely monitor inflation trends in the months ahead. Persistently high or accelerating price pressures could constrain future interest rate cuts. Fed Chair Jerome Powell reinforced a cautious stance in recent comments, noting inflation “moving sideways” as the reason for scaling back expectations for interest rate cuts next year from four quarter-point cuts predicted in September to just two.
- U.S. Economic Growth Revised Up to 3.1% in Q3
Among the year’s pleasant surprises, the U.S. economy grew at a 3.1% annualized pace in the third quarter, stronger than originally estimated, according to the Commerce Department’s report this week. The revision is an improvement from the initial estimate of 2.8% growth, and at a slightly stronger pace than the prior quarter which expanded at a 3% annualized rate. In related economic news, weekly unemployment benefits claims decreased, reflecting strength in hiring and boosting the Fed’s upward projections for economic growth over the near term.
Why It Matters: Driving the increase were stronger exports and healthy consumer spending. Forecasters have been predicting a slowdown in economic growth for several quarters, but the latest report offers proof that the economy continues to expand, and early indications suggest the economy could be on track to sustain that momentum in Q4 with the Atlanta Fed’s GDP estimator pointing to a preliminary 3.2% in the final quarter of the year.
- Boston the Latest Metro to See Surge in Office Leasing
In the latest leasing news, BXP inked a 413,000 square foot office lease renewal with law firm Ropes & Gray at the iconic Prudential Tower in Boston. The lease doubles the law firm’s current space and commits to the expanded space through 2041. Metro Boston’s aggregate office leasing in Q3 increased by a significant 31% over Q2 according to Avison Young with prime office space at trophy buildings accounting for 22% of all Q3 leasing activity compared to just 6% in the prior quarter.
Why It Matters: The news reflects growing demand for prime office space as tenants’ leases expire. As return to office policies continue to pick up steam, companies are demanding space to accommodate employees and offer amenities like proximity to transportation, retail centers, attractive meeting spaces, and entertainment options. At the same time, the post-pandemic shifts have led to lower sales prices for office properties and less new development as demand for office space remains sluggish.
For commentary on these CRE developments and more, tune in to the LightBox CRE Weekly Digest podcast.
Did You Know of the Week
Did you know that preliminary responses to our CRE Capital Markets Advisory Council survey predict an average 19% increase in CRE deal volume next year, and a 24% increase in CRE lending? Watch for our 2025 Predictions report in January for the final results and commentary.
Happy Holidays from the LightBox team!
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