Phoenix's baseball team may have lost to the Texas Rangers in the World Series, but the Phoenix real estate market is beating Dallas-Fort Worth.
Arizona's largest metropolitan area narrowly ranks ahead of D-FW in our annual ranking of the nation's best real estate markets for investment.
This year's new real estate trends drop D-FW to third place behind Nashville and Phoenix report. The 45th annual forecast from PricewaterhouseCoopers and the Urban Land Institute names U.S. metropolitan areas as the best places to buy, build and finance real estate in the year ahead. .
North Texas ranked second in last year's rankings and fourth the year before.
Nashville has been named a top market for the third year in a row.
In addition to D-FW, Austin and San Antonio also made the top 10 list. Houston is 11th.
“A few states stood out,” said Charles DiRocco, director of real estate research at PwC. “Texas has four. Florida didn't make the top 10, which was a bit of a surprise.
“The Sunbelt continues to be a region to watch,” he says.
The 2024 Real Estate Outlook was announced at the Urban Land Institute's annual meeting held this year in Los Angeles. The real estate group held an event in Dallas last October.
The forecast for metropolitan areas with the best opportunities was overshadowed by the economic outlook for the industry as a whole, which has been hurt by rising interest rates.
DiRocco predicted that 74 out of 80 markets will be low in 2024.
“There's a new sheriff in town, and it's Interest,” he said. “In commercial real estate, it becomes an even bigger challenge.
“Commercial real estate debt is an industry topic and an economic topic.”
DiRocco called the current real estate cycle the “Great Reset.”
More than $725 billion in commercial real estate and apartment loans are coming due nationwide this year. And $1.2 trillion in commercial real estate debt will have to be refinanced over the next two years, all at higher mortgage rates.
In response to high interest rates, a survey of more than 1,200 real estate professionals found that workforce availability and job growth were the top concerns. Inflation remained in fifth place among the industry's top economic issues.
Housing costs, immigration policy, and political extremism are the top sociopolitical concerns for next year.
Real estate executives predict that housing will lead the way when it comes to building and purchasing new projects in 2024.
“No. One was residential space: single-family homes and apartment complexes.” DiRocco said. “No wonder what came in last place. The office.”
After the pandemic, demand for office buildings plummeted. Most real estate experts surveyed said the outlook for offices next year was “terrible” for the poor.
“The Armageddon of the office has arrived,” said Sarah Queen, head of equity strategy at MetLife Investment Management. She said, “There are some buildings that are doing great work. And then there are the have-nots. Most of the vacancies are in the have-nots.”
Queen said during previous real estate downturns, office owners knew their buildings would eventually fill up. “I don’t understand that today,” she said.
Mary Razin, senior research director at Heitman Financial, said there is too much office space in the United States.
Despite new office building construction, D-FW currently has record office vacancies.
“We don't need as much as we have. There will be some demolition and renovation,” Razin said. “But you need office space. Some companies that are currently working exclusively from home will find that it doesn't work very well when the next recession comes.”
Despite the challenge of rising finance costs, buyers want to take advantage of the low prices of commercial real estate. PwC's DiRocco said forecasters gave 2024 its “highest buy rating in years.”
“I think investors are waiting for an entry point,” he said.
Potential buyers raised billions of dollars to close the deal.
“You can buy the best real estate in the best submarkets for 30 to 50 percent less than replacement cost,” said Spencer Levy, senior economic advisor at Dallas-based CBRE Group. “There is a huge opportunity across the board.”
But the best buys may not be in the emerging trend cities with the highest industry ratings next year.
“Sometimes that listing should be a 'sell' signal,” Razin said. “If I was selling it today, I might be selling Nashville.”
