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Will Commercial Real Estate Sink or Swim in 2024?

March 12, 2024

Law clerk Madison Geiger contributed to this article. 

In 2024, we anticipate that the commercial real estate industry will continue to face distress with some stabilization. This alert focuses on three subsets of the commercial real estate market: retail, office, and multi-family. Each subset has its own outlook. We predict that the retail industry will likely see fewer bankruptcy filings than in 2023, but the distress in office space and multi-family will rise.


In 2023, we saw well-known brick-and-mortar stores filing for bankruptcy including David’s Bridal, Serta, Tuesday Morning, Bed Bath and Beyond, Party City, Soft Surroundings, and Rite Aid. We anticipate a more stable outlook for the retail industry in 2024. While the retail industry may be more stable than in 2023, we anticipate that discretionary spending will remain low in 2024, leading to continued distress for non-essential retailers. Discretionary retailers with maturing debt, inefficient footprints, or a weak online presence may be particularly vulnerable. Our “watch list” for 2024 includes JOANN, Express, Rent the Runway, Petco, and The Container Store.


Office space vacancies are at a historic high. It is anticipated that Class B and Class C office space vacancies will continue to rise through 2024. These vacancies will continue to exacerbate the financial distress that these entities are facing with maturing debt. However, Class A office space has maintained occupancy rates and consequently avoided financial distress. Some communities are seeing the conversion of Class B and Class C office space into residential apartments, but the viability of the conversion is challenged by the high cost and structural limitations of the building. Class B and Class C office space will continue to face financial distress in 2024, and creative solutions may be the only option where guarantor liability makes property owner bankruptcy an unreasonable avenue.


We anticipate a rise in distressed multi-family properties in 2024. Attributing to the distress are rising debt costs, an increase in supply, and the slow growth in rent increases. Currently, the cities with the highest delinquency rates on loans are San Francisco, New York, DC, and Houston. Overall, the demand for multi-family residences remains high as people move towards urbanization, but older multi-family units have been unable to keep pace with newer properties leading to increased vacancies. With more than $1 trillion in multi-family debt due to mature through 2028, 2024 may be the start of an avalanche.

The commercial real estate industry has faced difficulties since the pandemic disrupted occupancies and introduced a new virtual method of work and play. What were once thought to be temporary changes in behavior have become the new norm as working from home and online shopping are an everyday reality. The factors leading to the distress outlook in 2024 have been brewing since the pandemic, and the commercial real estate industry must adapt to these changes to continue to prosper amongst change.

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