Following two years of consecutive quarter-on-quarter declines in global real estate deal volume, the real estate industry is hoping 2024 presents a turning point.

This time last year, property prices teetered on a precipice amid ongoing interest rate hikes. After subsequently falling, values still have some way to adjust depending on sector and geography. But the latest economic signals have cultivated a distinctly more positive tone among market participants.

In its 2024 outlook paper, Houston-based manager Hines noted inflation rates in 22 major economies around the world have substantially declined from their previous peaks, which it wrote was “encouraging compared to the trends experienced a year ago.”

For many, the expectation that interest rates have peaked is injecting confidence into the market at the turn of the year. At the US Federal Reserve’s December meeting it voted to hold rates steady between 5.25 and 5.5 percent, signaling cuts by the end of 2024 of up to 0.75 percentage points in the process. The timing of this remains uncertain, however, as per the minutes released this week.

“We had figured in some rate cuts a little later,” said Stephen Tross, chief investment officer of international investments at Dutch investor Bouwinvest Real Estate Investors, in response to the Fed’s meeting. He told PERE last month that, while this is unlikely to provoke a “big bang reaction” in real estate markets, the projection is earlier than expected and could lead the real estate market to bottom out in mid-2024.

Such thinking is shared by brokers CBRE and Cushman & Wakefield, which predict investment activity in the US market will pick up in the second half of the year.

Others are not so sure. Ward Fitzgerald, chief executive officer of Philadelphia-based manager EQT Exeter, told PERE it could be 2025 or 2026 until the market returns to a healthy level of activity because lenders are still extremely cautious and selective on real estate.

Indeed, with $1.5 trillion of US commercial real estate loans due to mature before the end of 2025 per Morgan Stanley analysis, lenders already have enough on their books to contend with. Regardless of what action the Fed takes, at least half of loan maturities backed by office assets in the US will be “completely underwater” in 2024, said Alfonso Munk, CIO for Hines Americas, talking to PERE late last year.

The stance taken by the European Central Bank and the Bank of England in December was less dovish than the Fed’s. But after months of regular rate hikes, an indication that rates will be held steady – as well as a decline in bond yields – is progress enough for some.

Speaking to PERE in December, Mark Allnutt, executive director, Europe at Charleston-based manager Greystar, observed a consensus in Europe that cap rates are likely to stay elevated for longer, creating a culture of acceptance among sellers and confidence among buyers that could incite some movement in the transaction market from as early as Q1.

Similarly, bid-ask spreads are “starting to narrow” globally, wrote US asset management behemoth BlackRock in its 2024 outlook, heralding a window of opportunity for real estate investors.

While the industry is by no means out of the woods as far as pending debt maturities are concerned, the suggested direction of travel from central banks in the next 12 months will give many market participants the confidence to crystalize business plans once again, if not determine new ones.