Looking out to 2024, a recent Marcus & Millichap report expects commercial real estate development to slow, based on "elevated" interest rates.

Additionally, construction materials costs remain elevated on a historical basis (up 33.5% above pre-pandemic levels), despite a retreat in shipping costs and the average prices of steel and gasoline in recent quarters. Wage growth was up 5.8 percent in 2022.

Projects that have already broken ground or locked in financing are moving forward, but banks have been executing fewer construction loans relative to previous years. Lenders are tightening their underwriting in response to increased risk exposure.

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