MISSISSAUGA, ON, March 18, 2024 /CNW/ - Morguard Corporation ("Morguard") (TSX: MRC) today released its 2024 U.S. National Economic Outlook and Multi-Suite Residential Rental Market Fundamentals Report, offering a comprehensive analysis and insights into the 2024 U.S. real estate market and economic landscape. The multi-suite residential rental market's rent growth will be modest in 2024 as demand falls short of new supply during the peak phase of the construction cycle. The U.S. economy is expected to expand at a relatively solid pace in the near term, in line with the accelerated economic growth observed in the second half of 2023. The resulting job growth and consumer confidence will support positive rental demand patterns in 2024.
"Early in 2024, inflation pressures have significantly eased, providing a solid footing for the Fed to begin interest rate cuts," said Keith Reading, Senior Director, Research at Morguard. "This move is poised to elevate real disposable income and consumer spending, reduce borrowing expenses, and thereby establish a robust framework for sustained economic expansion and real estate market gains."
Multi-Suite Residential Rental Real Estate
The new supply in the multi-suite residential rental market is expected to outpace demand for an eighth consecutive year in 2024. Approximately 450,000 new rental units are anticipated to enter the rental property inventory, continuing the peak phase of the construction cycle. Consequently, rent growth will be relatively modest in 2024 with the Midwest and Northeast regions expected to outperform.
Investment property transactions will remain below the most recent peak level through to the midway point of 2024, given the elevated cost of debt capital and heightened investment risk and economic uncertainty. Nevertheless, properties across the country have and will continue to sell with institutional groups focusing on acquiring stabilized, high-quality assets. Notably, private capital groups will remain relatively active, despite the high cost of debt capital and elevated sector risk.
Economic Factors
The U.S. economy is poised for relatively robust expansion in the near term, building on the positive momentum of the second half 2023. Lower interest rates and inflation levels will drive economic output in 2024. The Federal Reserve is anticipated to cut rates in late spring or early summer with inflation expected to fall within the Fed's 2.0% target range by mid-2024, both of which are sooner than initially forecasted. These shifts are expected to bolster consumer spending patterns, leading to increased economic output. Despite potential downside risks such as supply-side weaknesses and reduced household spending, the U.S. economy is projected to maintain its solid pace of expansion throughout 2024.
Private Consumer Expenditure (PCE) growth is forecast to stabilize over the near term, driven by rising real disposable income levels and an increase in funds available to U.S. consumers to spend on non-discretionary items. This is due largely to an expected lowering borrowing rates and continued downward pressure on consumer prices. Despite the cooling of the U.S. labor market and weakened demand for labor, wages are projected to continue rising on a nominal basis in the near term while job growth is strong enough to support a stable PCE growth trend.
Regional Highlights
Washington-Arlington Alexandria Metropolitan Statistical Area (WAA MSA)
The multi-suite residential rental market is forecast to be stabilized in the near term with robust construction activity and modest rent growth. The WAA MSA economy will see modest growth, driven by tourism, recreation, and government sectors over the near to medium term.
Raleigh Metropolitan Statistical Area (Raleigh MSA)
A surge in multi-suite residential rental property inventory is anticipated, resulting in a moderation of rent growth. Economic growth in the Raleigh MSA will moderate, led by the computer systems design, miscellaneous professional and technical services, and construction sectors.
Atlanta-Sandy Spring-Roswell Metropolitan Statistical Area (ASSR MSA)
A stronger trend in capital flow is anticipated to emerge in the second half of 2024 in the multi-suite residential rental investment property market, driven by lower costs of debt capital. New supply deliveries will continue at a brisk pace in the ASSR MSA multi-suite rental market in the near term, resulting in stabilized market rents.
Palm Beach Metropolitan Statistical Area (PB MSA)
Palm Beach multi-suite residential rental market fundamentals will continue to soften in 2024 as new supply outstrips demand. However, there is an expected uptick in demand for investment-grade multi-suite residential rental properties during the latter half of 2024, driven by lower borrowing costs and decreased economic uncertainty.
Chicago-Naperville Elgin Metropolitan Statistical Area (CNE MSA)
Resilience will be the dominant theme in the CNE MSA multi-suite residential rental market in the near term, marked by a balanced dynamic between rental market demand and supply. Construction activity is expected to slow in 2024 amidst a relatively stable demand backdrop.
New Orleans-Metairie Metropolitan Statistical Area (NOM MSA)
Rental demand will outpace new supply in the NOM MSA's multi-suite residential sector in the near term with healthy demand anticipated for both the market's most expensive and lower-cost buildings. Consequently, rents are forecasted to continue gradually rising over the near term.
Dallas-Fort Worth-Arlington Metropolitan Statistical Area (DFWA MSA)
The DFWA MSA's multi-suite residential rental market is anticipated to face an elevated level of supply-side rental market risk in the near term as new supply deliveries have continued to be added to the inventory in recent years.
Denver-Aurora-Lakewood Metropolitan Statistical Area (DAL MSA)
Supply risk in the DAL MSA's multi-suite residential rental market is projected to peak in the near term. Consequently, rent growth is expected to continue slowing down. However, job growth and the high cost of homeownership will help maintain relatively healthy rental demand patterns over the near term.
Los Angeles-Long Beach-Anaheim Metropolitan Statistical Area (LALBA MSA)
The LALBA MSA's multi-suite residential rental market is expected to stabilize over the near term, due to the combined effects of new supply delivery slowdown and a moderately stronger demand trend. This stronger demand is partly attributed to the resolution of actors' and writers' strikes and an improved economic outlook.
The 2024 U.S. Economic Outlook and Multi-Suite Residential Rental Market Fundamentals Report is a detailed analysis of the 2024 real estate investment trends to watch in the United States. The full report, including an analysis of the real estate markets in Washington, Raleigh, Atlanta, Palm Beach, Chicago, New Orleans, Dallas, Denver, and Los Angeles is available at morguard.com/research.
About Morguard Corporation
Morguard Corporation is a major North American real estate and property management company. It has extensive retail, office, industrial, and residential holdings owned directly and through its investment in Morguard Real Estate Investment Trust and Morguard North American Residential REIT. Morguard also provides real estate management services to institutional and other investors. Morguard's owned and managed portfolio of assets is valued at $17.9 billion. Please visit www.morguard.com or follow us on LinkedIn.
SOURCE Morguard Corporation
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