•  Fewer super-sized, big-box stores built.

•  Fewer doctors buying property for offices and medical services, and likely fewer doctors.

 •  Lower interest rates, and with it, a consumer nudge in buying homes again.

 •  A continued impact from climate change, such as the escalating insurance crisis in Florida connected to a notable increase in weather-related events.

•  A hesitancy by some investors until the presidential election is decided.

•  The Southeast continues to see steady growth, and with it a robust consumer market.

Real Estate Outlook is held annually as part of the outreach efforts of CityBuilders, which provides shared learning opportunities to benefit students and alumni of Auburn’s Master of Real Estate Development program, as well as regional real estate professionals.

The opportunities include symposiums, panel discussions and webinars that bring leading real estate professionals together to share insights and best practices for economically sustainable development projects. Real Estate Outlook is the first of several educational events planned for the coming year.

Cause and effect

The rise in interest rates during 2023 meant to tame inflation affected the volume of sales and the prices that real estate companies can put on properties, said Jacob Watkins of Corcoran Reverie. “It’s been a very challenging year, I would say.”

His Florida-based company is being more creative in how it manages deals, he said, calling it a learning curve, but “we’re optimistic that this year will be different.”

“If we do see interest rates come down, real estate prices are probably going to increase,” Watkins said. “It will be interesting to see how that works out.”

Luxury markets continue to draw interest, and his company looks for unique opportunities such as working with locations that offer lakefront access, ocean front, or perhaps properties eyed for a second home or as a rental property.

“A lot of those things are becoming more important to people,” he said.

Overall, construction loans are harder to obtain, and construction prices remain out of balance with other costs and revenues, the panelists said.

"The cost of materials, construction, to get things done...have caused a massive reduction in deals because the cost has been so unbearable," said Richard Campbell III of Veritas Medical Real Estate Advisors.

Hotels, debt and Americans on the move

Dillard Adams, with Southeast Venture in Nashville, cited the hospitality market as a successful trend for his company.

“We have been building hotels like they’re going out of style,” he said, “even when hotels charge New York-style rates. So, something is happening there right now.”

He reminded the audience that 2024 is an election year, and that has a bearing on some investors.

“No one wants to do anything until they see who is elected,” Adams said, but joking, “and then, nothing changes.”

Sam Heide with Crawford Square Real Estate Advisors, meanwhile, pointed to debt-equity challenges looming into 2024.

“Construction loans are really hard to come by,” he said. “Personal recourse is going to be on the table for the foreseeable future, so get used to that.”

Consumer spending will remain a driving factor, Heide said. “If you look at credit card debt, car loan debt, there’s some things that cause consumer concern.... As long as the consumer stays healthy, I think we’ll be OK.”

Migration trends continue to be watched for population-growth markets, he said. “All of our Southeast states are seeing growth. As a retail investor, that’s where I want to go.”

Lender and government relations

Relationships, especially with lenders, are going to come into play during 2024, said Wes Lee of LIV Development. “There will be a much closer eye on debt. There is an extremely restrictive market.”

Loan seekers who treat debt more as a commodity and haven’t developed a good relationship with a lender could struggle, Lee said, whereas longstanding relationships are valued and remembered during tougher times in deciding loans.

Likewise, said David Garcia with Lincoln Avenue Capital, relationships with government officials are critical for success, especially when dealing with projects that involve affordable housing as his company does.

“We spend most of our time working with government agencies,” he said. “We have been seeing a little more continuity in terms of cities and developers needing to understand each other better.”

Changing market for healthcare

Campbell, who primarily deals with medical practices across the Southeast, said telemedicine will continue to play a limited role in healthcare as it had done during COVID, but it won't replace patients visiting doctors at medical facilities. 

“Doctors are making less and less," Campbell said, primarily because government and insurance reimbursements are heading in the wrong direction. It's also costing more to build new facilities, he added.

According to Campbell, those two factors are driving down doctors' incomes. "Now we’re seeing more doctors than ever telling their own children not to get into the field, because it’s not worth it to them.”

The younger class of physicians, Campbell said, are doctors who don’t like risks and don’t necessarily want to be property owners. “They just want to be a doctor.”

Nevertheless, he shared optimism for 2024 and ahead to 2025 as the medical field regains its focus and adjusts to the changing business climate for healthcare.

Article updated Jan. 15, 2024

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