Although the US housing market has been rather tumultuous in 2023 online, the commercial real estate sector is on high alert for what 2024 may bring. Brian Klinksiek, LaSalle Asset Management Global Head of Research and Strategy, joins Yahoo Finance Live to shed light on the state of the US commercial real estate market and what areas need improvement. Klinksiek observes that the US lacks an “eat, work, play culture."

Klinksiek insists that many major US cities “don’t yet deliver [a] commute-worthy experience” and that sentiment may potentially shift demand and property purchases, according to Klinksiek.

For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.

Video Transcript

JULIE HYMAN: What we have seen, you know, we talk more about the residential market, meaning like people buying and selling homes. And there, of course, we have seen a freeze, because people have locked in lower interest rates. Is some of that phenomenon happening on the commercial side as well? And so is that why maybe some stability in rates will help unfreeze some of it? I do want to get into the sectors, but I'm curious about this.

BRIAN KLINKSIEK: Well, the US is very special in a global context from a residential perspective, because we have 30-year fixed rate mortgages in the US. I actually live in the UK, and you can't fix a mortgage rate for anywhere near that length of time. And so the US has this unique characteristic. And that has made people sticky to their homes, which is actually put a floor under home prices and pushed some people into the rental market. We continue to see really strong demand in the rental market, which is where we're focused, where investors in income-producing real estate.

And the commercial side, it's a little bit more like residential mortgages and the rest of the world, where they reset more frequently. And so in the next-- right now and in the next couple of years, all of those resets in the maturity of those loans are going to have to be dealt with. And they're going to have to be dealt with in the context of property values that are lower than they had been.

JOSH LIPTON: And Brian, coming back to commercial real estate. When we look at a lot of American cities downtowns, they still don't feel surely as full as they used to be, right? What do you think the fix is there?

BRIAN KLINKSIEK: Well, I think the fix has to do around live, work, and play, and having a mix of activities in city centers. I think I mentioned that I live in the UK. I live in London. And in London, you see very different situations in different parts of the city. So Canary Wharf, which is a district of high-rise office towers, and there's not a whole lot to do other than go to the office, looks a lot like a lot of American downtowns, maybe like the financial district here in New York. And they've had a much weaker return to office there.

But in the West End, where my office is, there's you go out to dinner, go out to a show, it's a little more like Midtown Manhattan, where I was earlier today and the vibrancy there is palpable. And so the long run has to be creating a mix of activities and uses that draw people in. The phrase that I use is commute-worthy experience. Is it-- is the being in that place worth the effort and the cost and the time and the money and the pain of riding the subway or being stuck in traffic to get there? And I think a lot of American downtowns don't yet deliver that commute-worthy experience.