In light of the deterioration in the economic environment, our office metro forecasts have been downgraded across the board. Those downgrades are driven by a substantial shift in our yield view, which mean that capital values in all 17 metros are forecast to fall in the 2022-24 period, before showing signs of recovery in 2025. We continue to expect a substantial degree of differentiation between metros though, which is underpinned by our expectations of faster office-based employment growth in the Southern and Western metros, as well as our belief that the effect of the pandemic on firms’ location decisions is far from over. With overall performance to be squeezed over the next few years, we expect Atlanta, Dallas and San Diego to be the top performers, producing average annual returns of more than 6% p.a. over the next five years. On the other hand, we expect returns of just 4% p.a. in Chicago, Houston and New York City, largely reflecting their poor rent outlooks. Real Estate Drop-In (6th July, 2022): Join our US Commercial Property team for this 20-minute briefing on why we think this is the market top – and how far we expect returns to fall. Register now.
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