Brandon Svec, National Director of U.S. Retail Analytics with CoStar Group, presents the commercial outlook for 2024 in Chicago.

1. #CAROutlook

2. CRE Market
Conditions
Update
January 2024
Brandon Svec
National Director U.S. Retail Analytics

3. Commercial real estate is cyclical

4. Multifamily

5. National multifamily fundamentals soften from historically tight level
(50)
0
50
100
150
200
250
300
2%
3%
4%
5%
6%
7%
8%
9%
Vacancy
Net
Absorption
&
Net
Deliveries
in
Thousand
Units
Year
Net Absorption Net Deliveries Vacancy

6. National multifamily phase of cycle
Multifamily

7. Sun Belt markets leading way in
supply growth
29.6
12.6
6.6
2.9
7.7
5.0
2.9
10.8
6.3
11.2
21.4
17.5
5.5
5.2
13.2
13.2
8.0
11.6
21.4
9.4
0% 5% 10%
Dallas-Fort Worth - TX
Philadelphia - PA
Miami - FL
Omaha - NE
Columbus - OH
Fort Lauderdale - FL
Palm Beach - FL
Denver - CO
Northern New Jersey - NJ
Minneapolis - MN
Atlanta - GA
Phoenix - AZ
Richmond - VA
Salt Lake City - UT
Charlotte - NC
Orlando - FL
Jacksonville - FL
Nashville - TN
Austin - TX
Raleigh - NC
Share of Inventory
Net Deliveries (Last 4 Quarters)
Note: Includes markets with 75,000+ units inventory. Labels show Net Deliveries in Thousand Units.
0.8
1.1
1.0
2.6
11.3
1.4
1.2
2.4
3.2
4.0
3.0
22.8
1.3
3.1
2.4
10.0
1.6
2.6
1.9
7.8
0% 5% 10%
San Jose - CA
San Francisco - CA
Memphis - TN
Orange County - CA
Los Angeles - CA
Norfolk - VA
Oklahoma City - OK
East Bay - CA
Detroit - MI
San Diego - CA
Baltimore - MD
New York - NY
Tucson - AZ
Inland Empire - CA
Cleveland - OH
Chicago - IL
Louisville - KY
Sacramento - CA
Pittsburgh - PA
Seattle - WA
Share of Inventory

8. Under construction supply elevated,
but falling
0
150
300
450
600
750
900
1,050
1,200
0
25
50
75
100
125
150
175
200
225
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
Under
Construction
in
Thousand
Units
Construction
Starts
in
Thousand
Units
Year
Starts Under Construction

9. Chicago fundamentals maintaining balance despite national softening
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
(2,000)
0
2,000
4,000
6,000
8,000
10,000
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028
Vacancy
Rate
Net
Absorption
and
Net
Deliveries
Absorption Net Deliveries Vacancy

10. Rent growth laggards have become
leaders over the past year
1.5%
1.6%
1.9%
1.9%
1.9%
2.2%
2.3%
2.5%
2.5%
2.6%
2.7%
2.8%
2.8%
2.9%
3.0%
3.0%
3.3%
3.7%
3.8%
4.0%
-6% -3% 0% 3% 6%
Detroit - MI
Baltimore - MD
Milwaukee - WI
New York - NY
Saint Louis - MO
Oklahoma City - OK
Philadelphia - PA
Norfolk - VA
Boston - MA
Columbus - OH
Cleveland - OH
Indianapolis - IN
Kansas City - MO
Chicago - IL
Washington - DC
Omaha - NE
Cincinnati - OH
Northern New Jersey - NJ
Louisville - KY
Orange County - CA
Change from Previous Year
Rent Growth
Note: Includes markets with 75,000+ units inventory.
-5.0%
-3.1%
-2.6%
-2.5%
-2.5%
-2.3%
-2.0%
-1.9%
-1.8%
-1.6%
-1.0%
-0.8%
-0.8%
-0.7%
-0.7%
-0.1%
-0.0%
-0.0%
-0.0%
0.1%
-6% -3% 0% 3% 6%
Austin - TX
Orlando - FL
Jacksonville - FL
Raleigh - NC
Atlanta - GA
Phoenix - AZ
Nashville - TN
Portland - OR
Charlotte - NC
San Antonio - TX
Dallas-Fort Worth - TX
Salt Lake City - UT
Las Vegas - NV
East Bay - CA
Tampa - FL
San Francisco - CA
Sacramento - CA
Fort Lauderdale - FL
Inland Empire - CA
Los Angeles - CA
Change from Previous Year

11. Office

12. National office fundamentals
continue to soften
(60)
(40)
(20)
0
20
40
6%
8%
10%
12%
14%
16%
Vacancy
Net
Absorption
&
Net
Deliveries
in
Million
Square
Feet
Year
Net Absorption Net Deliveries Vacancy

13. National office in recession phase of
cycle
Office

14. Higher quality buildings taking brunt
of losses
0%
5%
10%
15%
20%
25%
Vacancy
Year
1 & 2 Star 3 Star 4 & 5 Star

15. Majority of markets lost demand over
past year
-0.0
-0.1
0.0
0.0
0.0
0.1
0.5
0.1
0.2
0.2
0.1
0.2
0.3
0.2
0.4
0.5
0.4
2.0
1.0
0.4
(6%) (4%) (2%) 0% 2%
Columbus - OH
Boston - MA
San Diego - CA
Richmond - VA
Providence - RI
Fort Lauderdale - FL
Dallas-Fort Worth - TX
Norfolk - VA
Orlando - FL
Cincinnati - OH
Louisville - KY
San Antonio - TX
Tampa - FL
Raleigh - NC
Nashville - TN
Miami - FL
Salt Lake City - UT
Houston - TX
Saint Louis - MO
Tulsa - OK
Share of Inventory
Net Absorption (Last 4 Quarters)
Note: Includes markets with 50 Million+ Square Feetinventory. Labels show Net Absorptionin
Million Square Feet.
-9.3
-2.5
-1.3
-3.8
-1.1
-2.4
-1.8
-1.6
-1.4
-5.5
-1.3
-1.2
-3.5
-1.5
-1.3
-9.4
-1.5
-1.7
-0.4
-0.9
(6%) (4%) (2%) 0% 2%
San Francisco - CA
East Bay - CA
Hartford - CT
Seattle - WA
Stamford - CT
Denver - CO
Pittsburgh - PA
San Jose - CA
Austin - TX
Chicago - IL
Kansas City - MO
Portland - OR
Atlanta - GA
Northern New Jersey - NJ
Charlotte - NC
New York - NY
Orange County - CA
Phoenix - AZ
Rochester - NY
Cleveland - OH
Share of Inventory
Net Absorption (Last 4 Quarters)

16. Chicago office fundamentals forecast to
weaken further
10%
12%
14%
16%
18%
20%
22%
(6,000,000)
(5,000,000)
(4,000,000)
(3,000,000)
(2,000,000)
(1,000,000)
0
1,000,000
2,000,000
3,000,000
4,000,000
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028
Vacancy
Rate
Net
Absorption
and
Deliveries
Net Absorption Net Deliveries Vacancy

17. Industrial

18. National industrial fundamentals
have turned quickly
0
40
80
120
160
200
3%
4%
5%
6%
7%
8%
Vacancy
Net
Absorption
&
Net
Deliveries
in
Million
Square
Feet
Year
Net Absorption Net Deliveries Vacancy

19. National industrial in moving into phase IV
of cycle
Industrial

20. Major industrial markets seeing majority of
new supply
8.6
8.7
8.8
9.1
10.3
10.6
10.7
12.9
14.1
14.3
18.1
19.6
21.0
21.7
27.2
29.4
30.2
34.8
35.1
70.1
0 10 20 30 40 50 60 70 80
Nashville - TN
Las Vegas - NV
Memphis - TN
Salt Lake City - UT
Cincinnati - OH
Kansas City - MO
Charlotte - NC
Austin - TX
New York - NY
Spartanburg - SC
Columbus - OH
Indianapolis - IN
Savannah - GA
Philadelphia - PA
Atlanta - GA
Phoenix - AZ
Inland Empire - CA
Houston - TX
Chicago - IL
Dallas-Fort Worth - TX
Million Square Feet
Net Deliveries (Last 4 Quarters)

21. Significant amount of supply underway,
but starts are falling
0
200
400
600
800
0
50
100
150
200
Under
Construction
Million
Square
Feet
Construction
Starts
in
Milloin
Square
Feet
Year
Starts Under Construction

22. Demand flowing into both established and up and coming markets
3.9M
3.9M
3.9M
4.3M
4.4M
4.5M
4.7M
5.0M
5.4M
5.4M
6.1M
6.6M
7.0M
7.1M
8.1M
10.4M
13.9M
17.8M
18.8M
30.6M
0 5 10 15 20 25 30 35
Fort Collins - CO
Richmond - VA
Cincinnati - OH
Atlanta - GA
Detroit - MI
Kansas City - MO
Austin - TX
Scranton - PA
Louisville - KY
Nashville - TN
Las Vegas - NV
Charlotte - NC
Philadelphia - PA
Indianapolis - IN
Columbus - OH
Savannah - GA
Phoenix - AZ
Chicago - IL
Houston - TX
Dallas-Fort Worth - TX
Million Square Feet
Net Absorption (Last 4 Quarters)

23. Chicago industrial fundamentals forecast to
remain stable
0%
2%
4%
6%
8%
10%
(5,000,000)
0
5,000,000
10,000,000
15,000,000
20,000,000
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027
Vacancy
Rate
Net
Absorption
and
Net
Deliveries
Net Absorption Net Deliveries Vacancy

24. Retail

25. Announced Store Openings Exceed
Closures For Third Consecutive Year
8,115
7,860
5,890
3,940
1,680
4,070
-
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
2021 2022 2023
Number
of
Stores
Announced Store Openings Announced Store Closings
Source: Daily on Retail, January 2024

26. National retail fundamentals continue
to tighten
(20)
(10)
0
10
20
30
40
50
3.0%
3.5%
4.0%
4.5%
5.0%
5.5%
6.0%
6.5%
2016 2017 2018 2019 2020 2021 2022 2023
Vacancy
Net
Absorption
&
Net
Deliveries
in
Million
Square
Feet
Year
Net Absorption Net Deliveries Vacancy

27. Retail (still) in recovery phase of cycle
Retail

28. Most U.S. markets seeing retail
demand growth
0.6
1.1
0.7
0.9
2.3
3.8
0.9
1.2
0.9
3.3
0.9
0.9
1.1
1.0
3.9
1.4
1.8
3.7
2.6
2.3
(1%) 0% 1% 2%
East Bay - CA
Minneapolis - MN
Kansas City - MO
Long Island - NY
Atlanta - GA
Chicago - IL
Northern New Jersey - NJ
Saint Louis - MO
Cincinnati - OH
Dallas-Fort Worth - TX
Indianapolis - IN
Las Vegas - NV
San Antonio - TX
Nashville - TN
Houston - TX
Miami - FL
Charlotte - NC
Phoenix - AZ
Orlando - FL
Austin - TX
Share of Inventory
Net Absorption (Last 4 Quarters)
Note: Includes markets with 100 Million+ Square Feetinventory. Labels show Net Absorptionin Million Square Feet.
-0.4
-0.3
-0.3
-0.0
0.0
0.1
0.1
0.2
0.2
1.2
0.3
0.2
0.3
0.4
0.6
0.5
1.1
1.0
0.7
0.5
(1%) 0% 1% 2%
Seattle - WA
Orange County - CA
Los Angeles - CA
Detroit - MI
Cleveland - OH
San Diego - CA
Milwaukee - WI
Sacramento - CA
Portland - OR
New York - NY
Columbus - OH
Oklahoma City - OK
Baltimore - MD
Pittsburgh - PA
Inland Empire - CA
Tampa - FL
Philadelphia - PA
Washington - DC
Denver - CO
Fort Lauderdale - FL
Share of Inventory

29. New retail deliveriesnot keeping up with obsolescence
0.0%
0.1%
0.2%
0.3%
0.4%
0.5%
0.6%
0.7%
0.8%
08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23
Share
of
Inventory
Gross Deliveries as Share of Inventory
Gross Deliveries Obsolescence Rate (100 Year Building Life)
Obsolescence rate assuming 100-year building
life

30. Higher rates and costs weigh on new construction starts
0M
10M
20M
30M
40M
50M
60M
70M
80M
08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23
U.S. Retail Construction Starts
Construction Starts Historical Average

31. Lack of supply and steady demand
gains push vacancy lower
Forecast
0%
2%
4%
6%
8%
10%
12%
Vacancy
Year
Malls Power Center Neighborhood Center Strip Center General Retail Other

32. Vacancy forecast to remain tight due
to lack of new supply
Forecast
0%
2%
4%
6%
8%
10%
12%
Vacancy
Year
Malls Power Center Neighborhood Center Strip Center General Retail Other

33. Capital Markets

34. Year-over-year sales volume fell by 45% in
2023Q3
0
50
100
150
200
250
300
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 *2023
Sales
in
Billion
Dollars
CRE Sales Transaction Volume
Quarter-to-date as of 9/30/23; Includes Multifamily, Office, Retail, Industrial, and Hotel; sales data collected during the quarter.
Initial Interest
Rate Hike
Fourth-quarter sales activity
will be up against tough comps

35. All property sectors see transaction
volumes tumble
0
20
40
60
80
100
120
140
160
Multifamily Office Retail Industrial Hotel
Billion
Dollars
Sales Volume
←17Q1 23Q3→

36. With bigger deals seeing the biggest drop
in volume
(90%)
(80%)
(70%)
(60%)
(50%)
(40%)
(30%)
(20%)
(10%)
0%
2021 Q4 2022 Q1 2022 Q2 2022 Q3 2022 Q4 2023 Q1 2023 Q2 2023 Q3
Change
Since
2021Q4
Below $3 Million $3 Million to $10 Million $10 Million to $25 Million $25M to $50 Million $50M or Greater
Includes Multifamily, Office, Retail, Industrial, and Hotel
Change in Sales Volume by Deal Size From Peak

37. Investor appetite for risk going down, cap
rates rising
4%
5%
6%
7%
8%
9%
10%
07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23
Market Cap Rate
Office Retail Industrial Multifamily Hotel

38. Causing prices to decline across all sectors
Source: CoStar, December 2023
(15%)
(10%)
(5%)
0%
5%
10%
15%
20%
Industrial Multifamily Hotel Retail Office
Market
Price
Growth,
YoY
Change
Change in Market Price by Property Type (YoY)
Forecast Forecast Forecast Forecast Forecast
2022 2023 2024 2025 2022 2023 2024 2025 2022 2023 2024 2025 2022 2023 2024 2025 2022 2023 2024 2025

39. With large properties in primary markets see the largest value losses
50
100
150
200
250
300
350
400
450
00 05 10 15 20
Index
Value
(December
2000
=
100)
CoStar’s Value-Weighted Commercial Repeat-Sale Indices
U.S. Office U.S. Industrial U.S. Retail U.S. Multifamily
Source: CoStar, August 2023

40. $766 billion in bank loans to mature
between 2024 and 2026
125 116
77
46
13 18
56
58
43
29
27
11
13
38
30
18
14
6
25
31
27
24
13
10
7
22
33
24
13
9
3
0
50
100
150
200
250
300
2024 2025 2026 2027 2028 2029 2030 2031 2032 Later
Bank
Debt
Maturities
in
Billions
of
Dollars
CRE Maturities at Depository Lenders
Multifamily Office Industrial Retail Hotel
Source: MBA

41. Office and hospitality maturities at risk
with delinquency rates trending up
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23
90+
Day
Delinquency
Rate
CMBS Delinquency Rates
Retail Lodging Office Industrial
Source: CoStar; NBER; Trepp 90-day delinquencyrates, August 2023

42. Thank you!
January 2024
Brandon Svec
National Director, U.S. Retail Analytics