Despite challenging conditions, U.S. real estate investors are planning to return to the property market this year with a preference for cities with an established track record of increasing value.

More than 60% of investors expect to add to their property portfolios, according to CBRE's 2024 U.S. Investor Intentions Survey. That's a sharp pivot from last year, when only 16% of investors planned to buy real estate.

About 87% of investors said higher-for-longer interest rates were their biggest concern this year when it comes to real estate, followed by tighter credit availability and loan terms, as well as differing price expectations of buyers and sellers.

Still, most investors expect deal activity to begin to recover in the second half of the year. Reasonable price adjustments and more distressed opportunities are important to investors buying. Multifamily and industrial real estate continue to be the preferred property type for investment in 2024, according to the survey.

"While credit conditions remain challenging, investors are looking beyond the current difficulties," said Chris Ludeman, global president of capital markets for CBRE, in a statement. "We expect investment activity to gain momentum in the second half of the year as financial conditions improve. Investors are particularly focused on opportunistic and core-plus strategies as they seek higher risk-adjusted yields."

CBRE surveyed 134 mostly U.S. investors, with real estate assets under management ranging from less than $5 billion to more than $50 billion, between mid-November and mid-December, according to the company.

Among investor types, developers, private equity funds, real estate funds and real estate investment trusts are expected to be particularly active this year.

The Dallas-Fort Worth region, the nation's fourth-largest metropolitan area, remained the most preferred market for investors for the third consecutive year, followed by Miami, Atlanta, Nashville in Tennessee and Charlotte, North Carolina, according to the survey.

In another ranking, investors chose high-growth secondary markets and large East Coast markets for being the top areas expected to outperform this year. Dallas-Fort Worth ranked No. 1 for total property returns, followed by Miami and Boston, according to CBRE's survey.

"It's not exactly surprising to see the favored markets are where population is and where there are dynamic economies," Darin Mellott, vice president of capital markets research for CBRE, told CoStar News. "Commercial real estate is a reflection of those local economies and the investors responding to our survey are believers in the long-term growth of these metropolitan areas."

New York City ranked No. 6 for anticipated total property returns this year and No. 7 as the most attractive market.

"There's a saying that New York City is the nation's longest running boom town, with it being as established and liquid as it gets, with investors attracted to its future," Mellott added. "Clearly the Sun Belt is favored, and the East Coast markets have a long track record with investors."

It was only three years ago when Dallas-Fort Worth began rising the ranks of preferred U.S. markets when it came to large investors, with Austin, Texas, being singled out as the top preferred U.S. market by real estate buyers. This year, Austin slides down the survey's ranking to No. 10 of the most attractive markets for investment, according to CBRE survey.

The Austin market seems to be affected by what Mellott said is a lot of new real estate hitting an otherwise smaller U.S. metropolitan area in a short time. If demand isn't keeping pace with supply, it could disrupt property pricing and the attractiveness of the market for investors, he said.

Compared with the Dallas-Fort Worth region, Austin, while a growth city, is a smaller metropolitan area and is unable to expand at the size and pace of North Texas, Mellott said.

"It's really a story of dynamism," Mellott added. "Investors are clearly expressing a confidence in the dynamism of Dallas-Fort Worth and what it means for the future."

Mellott, who spoke to CoStar News following the U.S. Federal Reserve's policy meeting Wednesday, said the monetary policy is the biggest threat impacting investor sentiment this year. The Fed decided to hold interest rates and isn't expected to cut rates in March.

"We anticipated they would hold rates," Mellott told CoStar News. "They clearly opened the door to rate cuts later this year and they would do so in a careful manner. The committee wants to see a little bit more evidence that inflation is under control."

CBRE is forecasting four rate cuts this year totaling 100 basis points or 1%, Mellott said.