LightBox Activity Index Up Modestly in Q1 2024 from Q4 Low; Forecast Redrawn as Rate Cuts Stall

LightBox has released its first quarter CRE Activity Index, which highlights a modest uptick in deal activity from the previous quarter's low and provides insights into an expected, gradual recovery for the rest of 2024.

The LightBox CRE Activity Index provides an aggregate view of the market with information on property listings and due diligence. In an average year, LightBox customers complete thousands of transactions over the LightBox platform to support commercial real estate dealmaking offering a preview of potential market performance. In Q1 2024, the LightBox Index rose to 78.7, an increase of 13.4 points from the three-year low in Q4 2023. Year over year, the Index is just slightly weaker than the 81.3 reading.

According to the report commentary, intelligence from LightBox suggests guarded optimism for a thaw in property transactions although heavily dependent on the Federal Reserve policy. Sellers, previously hesitant due to market conditions and rising interest rates, are showing signs they are testing the waters. This cautious optimism also stems from a growing sense that the pricing gap between buyers and sellers could finally be narrowing.

"The uptick in the first quarter is confirmation that activity was increasing and a sign that hesitant investors and lenders were slightly more willing to put money to work than they were in Q4 2023," said Manus Clancy, head of LightBox Data Strategy.

For the rest of 2024, LightBox analysts forecast a continued upward trajectory at a slower pace than projected in the first quarter of this year.

"With immediate rate cuts stalled, investment may be limited to opportunistic equity investors who are increasingly eager to deploy capital, focusing on distressed assets and refinancing activity as loans mature throughout the remainder of the year," saidDianne Crocker, LightBox principal analyst.

While the market expectation for interest rate cuts has moved from midyear to at least September, transactions in the second half of the year could rebound modestly as tighter risk spreads and seller capitulation deliver an uptick in market velocity.

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