US Commercial Property
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US Commercial Property

US Commercial Property Data Response

Commercial Property Lending (Sep.)

Outstanding real estate debt increased for the fourth consecutive month in September, thanks to net lending turning a corner in the residential sector and accelerating in the commercial sector.

15 October 2021

US Commercial Property Update

Four likely winners in retail

The retail sector appears to be turning a corner, and we think that convenience-oriented Neighbourhood and Community (N&C) centres, out-of-town retail, “destination”-type malls and retail located in “desirable” southern metros are likely to be the sector’s winners over the next few years.

8 October 2021

US Commercial Property Update

Will remote working migrants drive office demand?

In-migration to southern metros with relatively low living costs and high desirability will be positive for office demand in those same metros. We think firms will be encouraged to set up offices in those locations given the growth in their skilled labour pools and the potential economic benefits. This means that, at the margin, rather than office-using jobs attracting talent, the location of the talent will attract firms.

4 October 2021

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. 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, ore “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 Apartment Markets Outlook (Q3 2021)

The apartment market is set for a stellar year. The reopening of cities is bringing vacancy rates down and pushing rents up, and strong investor demand has led to a sharp fall in yields. We expect national total returns of around 19% in 2021. The six major cities in this Outlook, which saw relatively large falls in capital values in 2020, will not quite match that this year. But most will catch-up in 2022 and beyond. Total returns in D.C. and Boston will outperform the national average of 7% p.a. from 2021-25, and L.A., NYC and Chicago will broadly match that return. The exception is San Francisco, where an exodus of footloose tech workers and high rents have cut demand. Even so, we still expect some recovery in demand, with rent growth turning positive and total returns of close to 5% p.a. from 2021-25. In view of the wider interest, we are also sending this US Commercial Property Outlook to clients of our US Housing service.

1 October 2021