There's finally hope for the commercial real estate market

Soaring borrowing costs and plunging prices walloped the global commercial-property market last year. Now, more clarity around values and an urgent need to address looming debt maturities are expected to spark more deals.

Sellers and buyers are finally seeing more opportunities to transact after uncertainty nearly froze the market for much of last year. The average number of bids per deal climbed 16% in November 2023 from the end of 2022, according to Jones Lang LaSalle Inc.

And the opportunity may be vast: The brokerage estimates that property owners with loans maturing through the end of 2025 will need as much as $570 billion in new equity given how sharply values have fallen.

With some central banks starting to signal that the rapid rate-hiking cycle is winding down, investors have gained more insight into borrowing costs. And several real estate deals - including the sale of roughly $33 billion in commercial-property debt from the failed Signature Bank - have also provided more transparency on values. The clarity is starting to spur some optimism in the beleaguered market.

"We're seeing more bids, and we're seeing more tours," Michael Gigliotti, a senior managing director at JLL, said in a phone interview. "You have maturing loans, you have dry capital, you have parties interested in investing in real estate."

The market still needs to see a longer period of stability with interest rates to fully unlock the capital that's on the sidelines, according to JLL. And many owners may wait to transact until values stabilize even more or potentially start rising.

But with more than $3 trillion of property around the world that has debt set to mature through 2025, many owners need to figure out what to do with certain properties and debt in the coming months, according to...