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Calling the top for US commercial real estate

Indicators that include a recently released investor sentiment survey and a sharp fall in REIT prices since the start of the year support our updated view that capital values will go into reverse in H2. In total, our latest forecasts call for a 6%-8% correction at the all-property level over the next couple of years, which would be a little less than implied by the falls that we have seen so far in US REITS.
Kiran Raichura Senior Property Economist
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US Commercial Property Data Response

Commercial Property Lending (Jul.)

CRE lending was again exceptionally strong in July, outpacing even the gains seen in recent months. But with investment transaction totals softening in Q2 and our expectation of a further slowdown in activity in H2, we do not expect the strength of recent months’ net lending to persist much longer.

15 August 2022

US Commercial Property Update

The six major markets will not be the only losers

Pandemic-accelerated migration patterns were already driving outperformance in the southern states. But they have also brought the poor performance of weaker markets to the fore. With those structural changes likely to continue to play out over the next few years, we expect metros such as Detroit, Indianapolis and Minneapolis to underperform in the coming years.

10 August 2022

US Commercial Property Focus

Ranking the US’s largest warehousing markets

We think that major distribution hubs, where rents are high and availability is low, will underperform their neighbouring markets over the next few years. Tenants will increasingly look past the major hubs in favour of nearby markets with better affordability and availability. Of these markets, we think that rental growth prospects are even better in the sunbelt due to the positive economic effects of inward migration. As a result, we think that prospects for the next three years are strongest in Memphis, Atlanta, Dallas, Houston, Philadelphia and Riverside.

4 August 2022

More from Kiran Raichura

US Commercial Property Outlook

All-property returns to fall to zero next year as values slide

The dramatic shift in the interest rate environment over the first half of the year means that we have brought forward (and increased) our forecasts for yield rises. Property valuations now look as bad as they did in 2007, and with the 10-Year Treasury yield moving toward 4% by year-end, something has to give. We now expect property yields to climb by a cumulative 40-50 bps over the next few years,. This will hit all sectors, although the elevated level of retail yields at present may spare them the worst, particularly in terms of the impact on capital values. All-property returns are still forecast to be 8% this year, but they will then drop to 0% next year and just 2.5% in 2024. We are still forecasting industrial returns of 18% this year. But beyond that the sector will be a major drag on returns in 2023-24, meaning it would go from hero to zero in the space of a year.

21 June 2022

US Commercial Property Update

Why we’re not too concerned by Amazon’s slowdown

The perception of Amazon as a bellwether for the industrial sector made the announcement that it had over-expanded in the last two years a potentially worrying one. But, the fact that Amazon is only cutting back on a small proportion of its space, and mostly for a short period, should allay some concerns. And, with other retailers and logistics operators likely to infill that space quickly given low levels of market vacancy, we don’t feel the need to significantly downgrade our forecasts at this time.

8 June 2022

US Commercial Property Data Response

US Metro Employment (Apr.)

The ongoing jobs recovery continued in April, although employment remained below its pre-pandemic level in more than half the 30 metros covered. Those losers tend to be expensive coastal metros and less “desirable” Northern metros, whereas the winners are cheaper locations in the South, a trend that we expect to persist.

1 June 2022
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