The country's largest commercial real estate company is aiming to revive its sluggish real estate business this year.
“We expect the market to begin to recover, albeit more slowly, in 2024,” said Emma Giammartino, chief financial officer of CBRE Group.
The Dallas-based commercial real estate giant this week reported higher-than-expected profits and sales for its most recent quarter.
Revenue from project leasing has increased slightly in recent months.
“I'm cautiously optimistic that the worst is over for office rentals, particularly Class A properties,” Giammartino said on a conference call with securities analysts. “There is,” he said. “U.S. office demand has gradually increased over the past six months.
“The growing consensus about a soft landing for the economy and the apparent stabilization of office occupancy rates may give more employers the confidence to enter into office leases. .”
The office market has been the hardest hit commercial real estate sector due to delays in returning employees home after the pandemic.
Office building vacancies in many U.S. metropolitan areas and Dallas-Fort Worth are near record highs. Many companies are reducing the amount of office space they use, and leasing activity is gradually slowing down.
Nearly 11 million square feet of subleased office space is being released by companies into the D-FW market.
CBRE CEO Bob Salentic said: “We believe we have hit bottom.”
Salentic said more employees are returning to the office, increasing demand for space.
“There is clearly pressure from companies to get employees back into the office for all sorts of reasons,” he said. “And what you're seeing is people are re-creating their spaces to create a better environment for their employees.
“Bad buildings are struggling and will continue to struggle.”
“Predictions of a bleak future for office buildings are overstated because people tend to like negative news,” Salentic said.
CBRE Group, which owns Dallas developer Trammell Crow Co., is already poised for a recovery in the commercial real estate market.
“We are steadily taking on new sites at Trammell Crow,” Salentic said. “We have been able to secure a significant number of development opportunities. What has happened is that so many people have been sitting on the sidelines that sites that would not otherwise have been made available. That means it has happened.”
Trammell Crow Co. just broke ground on Knox Street in Dallas on one of the largest new mixed-use projects in North Texas. The four-acre residential, office, retail and hotel development on the eastern edge of Highland Park is being built in partnership with MSD Partners, The Retail Connection and Highland Park Village Associates.
CBRE had $15.8 billion in real estate development projects worldwide at year's end.
“Investor and lender sentiment has improved, and we expect this to translate into higher volumes from the second half of this year, when short-term interest rates are expected to decline,” Salentic said.
