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Industrial demand returning to West Coast ports

Congestion at the ports of Los Angeles and Long Beach forced some container ships to reroute to the less busy ports of the Gulf Coast, supporting industrial occupier demand in those markets. But we expect that to be only a temporary switch, a view backed up by recent data. And the return of container ships to the West Coast will drive a resurgence in demand for its industrial markets. Property Drop-In (19th May): What will rising interest rates mean for commercial property returns in the US, UK and Europe? Join our 20-minute briefing on the outlook for returns on Thursday. Register now.
Sam Hall Assistant Property Economist
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US Commercial Property Update

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.

24 June 2022

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 Data Response

Commercial Property Lending (May.)

Commercial real estate debt continued to grow at a decent pace in May, in line with the recent strength in investment activity. However, we expect a weaker economic backdrop to weigh on commercial property lending and investment later this year.

13 June 2022

More from Sam Hall

European Commercial Property Update

Bright outlook for Belgium industrial rents

While economic growth is forecast to slow, limited supply and further strong growth in e-commerce-related demand mean Belgium industrial rental growth is expected to outperform its pre-pandemic average as well as most other euro-zone markets.

14 April 2022

European Commercial Property Update

Short-term boost to Spanish office rents

We think that a rebound in employment will help prime office rental growth in Barcelona and Madrid to outperform the euro-zone this year. But this is likely to be short-lived, as the shift to remote working weighs more heavily on office demand in Spain than in most other European markets in the coming years.

8 April 2022

US Housing Market Data Response

Housing Starts (Feb.)

Housing starts rose by 5.7% m/m in February following two months of declines. While a tight inventory of existing homes is supporting homebuilder confidence, shortages of labour and materials will weigh on starts this year. As a result, we expect starts will end 2022 at around 1.19m annualised.

17 March 2022
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