US Commercial Property

US Commercial Property

US Commercial Property Data Response

NCREIF Property Index (Q4)

The NCREIF index saw its strongest ever quarterly price appreciation in Q4, with values up by 5.1% q/q, driving a quarterly return of 6.2%. That took annual returns to 17.7%, led by industrial, where returns exceeded 40%. Meanwhile, improvements in the retail and hotel sectors point to better years ahead in 2022, but there are signs that returns in apartments and offices may be topping out.

26 January 2022

US Commercial Property Update

Surging incentives reveal weakness in the office market

Office incentives packages rose to unprecedented levels in 2021, which supports our view that market conditions are weaker than asking rents suggest. Given our expectation that vacancy will remain elevated in the coming years, incentives are likely to diminish only gradually.

19 January 2022

US Commercial Property Data Response

Commercial Property Lending (Dec.)

Commercial real estate debt ended 2021 with its largest monthly increase since the onset of the pandemic. Against a backdrop of strong investment activity, we expect commercial property lending to have a strong start to 2022.

17 January 2022

Most Recent Alerts

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US Commercial Property Data Response

NCREIF Property Index (Q4)

Our view

At the sector level, we expect industrial and apartments to outperform over the next 12-18 months, but with retail turning a corner, we now expect it to be the best performer over the 2022-25 period. Office performance will remain fairly weak at a national level, owing to the impact of more remote working. But our analysis shows that the extra one million fully footloose remote workers created by the pandemic will benefit many southern metros as it will drive migrants to those cheaper and, in some cases, more “desirable” locations. While that will directly support apartment demand in those metros, there will be indirect benefits for the office markets, as well as in the retail, leisure and industrial sectors.

Latest Outlook

US Commercial Property Outlook

Major Office Markets Outlook (Q4 2021)

Our stronger national office forecast this quarter mean upgrades to all six major markets. The largest of those uplifts is in Boston, which has seen a sharp rise up the rankings and where we expect total returns to hit double-digits in 2021 and 2022 before slowing to around 6% in 2023. With average annual capital growth of 1.5% over the five-year forecast, L.A. will not be far behind, while Chicago and Washington D.C. are forecast to occupy the middle slots. A notable upgrade to San Francisco means that its performance is now forecast to be similar to those two markets, leaving New York City trailing behind with total returns of around 4.5% p.a. across the forecast period. While the other five major markets are now forecast to outperform the national average with the addition of 2026 to our forecast period, NYC is forecast to underperform with its capital values still 5%-6% below their end-2019 levels by the end of 2026.

23 December 2021