The commercial real estate market may be on the rebound following the Federal Reserve’s recent interest rate cuts, the first since 2020, CNBC reports.
The 50 basis point reduction in September is expected to lower borrowing costs, enhancing deal flow in a sector that has faced significant challenges post-COVID, including reduced property values and declining sales.
Sentiment in the sector is improving, with refinancing and sales volumes beginning to rise. The second quarter of 2024 marked the first quarterly increase in transaction volumes since 2022, primarily driven by the multifamily sector, despite overall activity remaining lower than the previous year.
In the Baton Rouge market, commercial sales declined less than 1%, with the 12-month trailing volume totaling $423.9 million in September. The multifamily sector saw a slight decrease in sales volume in September, dropping to $76.2 million compared to $76.5 million in August. Property values increased 4.98% to $51,800 per unit.
The U.S. office sector continues to struggle with high vacancy rates and shifting demand due to hybrid work trends, according to CNBC. Although net absorption turned positive for the first time since 2022, overall vacancies increased to 16.7%, with office prices still significantly below prepandemic levels.
The office sector experienced a slight dip overall in Baton Rouge. Sales volume dipped 4.34% from August to September and deal velocity decreased by 4.35%. The price per square foot declined from $146.27 in August to $145.74 in September.
Baton Rouge’s office utilization rates hover around 60%, higher than the 50% national average, as the hybrid work model continues to impact the office market.
Branon Pesnell with Marcus & Millichap predicted at the annual Trends seminar that development activity would be “slow to nonexistent” this year in the office market due to high interest rates, slowing demand and increased construction costs. As a result, rental rates could rise at some point within the next year.
