Recent Trends in Real Estate Development: Winter 2024
Source: stock.adobe.com (Editorial Use License) <p>This blog post is part of a regular series that reports recent trends in private real estate financing. These posts are meant to inform local governments about current conditions facing private developers and development projects in their communities.</p> <p>Lending for real estate development projects</p> <p>Last quarter’s post discussed how rising interest rates affected private developers’ ability to cover debt payments, thereby affecting the financial feasibility of many real estate projects. Real estate market watchers shared cautious optimism that the Federal Reserve may begin to cut rates in 2024 after announcing that rates would remain the same for the third consecutive time in December 2023. However, some economists have said that higher than expected inflation numbers released in January 2024 could delay those rate cuts.</p> <p>In the months leading up to the Fed’s announcement, commercial real estate developers continued to report project delays caused by high interest rates. For example, Kane Realty – a commercial real estate development company – reported that future progress on the mixed-use “Downtown South” project in Raleigh is contingent on “interest rates going down”.</p> <p>According to one survey of the nation’s 30 leading apartment developers, a record 92% of those surveyed reported delays in starts for new projects.[1] Of those delays, 71% were because the project was not economically feasible in December 2023. See Figure 1.</p> <p></p> <p>In September, 79% of the apartment builders surveyed reported that projects were delayed due to the availability of financing, or loans to pay for the cost of construction. One reason why lending has declined is because lenders [...]</p>
