Company: MMI
Filing Date: 2025-02-27
Form Type: 10-K
Source: 0001578732-25-000015
Chunk: 83

Company: Marcus & Millichap, Inc.
Filing Date: 2025-02-27
Form: 10-K
Item: Item 7
Chunk 83
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 cost of debt capital to bolster transactional velocity in the coming year if public policy remains accretive to household formation and rising sentiment levels.

Investor Sentiment and Investment Activity

We facilitate investors buying, selling, and financing properties in order to generate commissions. Investors’ desires and need to engage in real estate transactions are dependent on many factors that are beyond our control. The economy, supply and demand for properly positioned properties, available credit and market events impact investor sentiment and, therefore, transaction velocity. In addition, our private clients, who make up the largest source of revenue, are often motivated to buy, sell and/or refinance properties due to personal circumstances, such as death, divorce, partnership breakups and estate planning.

The commercial real estate sector experienced a modest upturn of sales activity in the fourth quarter of 2024 as investors capitalized on the short window of sub-4% 10-year treasury rates. While the 10-year treasury has returned to mid-4% range, the combination of improving fundamentals and the need for investors to place capital and reposition their portfolios may continue to support positive momentum. Investor sentiment rose in the fourth quarter as evidenced by the rise of small business optimism and consumer sentiment, suggesting that investor caution is beginning to abate. However, elevated uncertainty spawned by the rapidly evolving cadre of federal policies that could change has the potential to counterbalance investor enthusiasm.

Several metrics including increased exclusive inventory being brought to market and a rising number of property tours in several markets and property types, suggest investor activity may rise in 2025. Nonetheless, a variety of factors including the economy, interest rates, financial market trends, geopolitical and commercial real estate pricing clarity could suppress activity in 2025. Should the Federal Reserve continue to reduce rates, it would support positive momentum, but a full market recovery will take additional time. Lenders are becoming more assertive with borrowers, and though loan extensions and modification remain common, incidents of forced refinancing and distressed sales are becoming more frequent. Office properties, particularly those in the urban core, continue to face the greatest uncertainty and the greatest challenges in acquiring debt financing. Apartment financing, underpinned by Fannie Mae and Freddie Mac, has generally been the most attainable, with typically lower interest rates than other property types. Defensive assets, such as single-tenant net lease properties backed by high-credit tenants, and medical office assets continue to receive buyer interest, but sales of these types of properties have also fallen as the flow of 1031 exchange capital coming from other property types