Commercial real estate – The size and scope of the recovery

It is increasingly clear to us that pricing in all three regions we forecast has bottomed, even if appraisals are yet to reflect that in mainland Europe and the US. And although we expect recent...

A second consecutive reduction in the size of value falls – just 1.4% q/q – in the Q2 NCREIF NPI appears to point to the price correction being all but over. However, with evidence of distress growing...

While the UK led the recovery in investment activity in Q4 last year, the latest data suggest the US and euro-zone are now also turning a corner. But given concerns over economic growth in all three...

The Q2 RICS commercial survey added to the growing body of evidence that capital values at the all-property level have now bottomed out. But, in line with our forecasts, it also implied that the...

Relatively high interest rates and structural problems within offices will weigh on the commercial real estate recovery over the next three years. Indeed, we forecast the upturn will be weaker than in...

The slower adjustment to past rises in interest rates and sharper hit to office demand mean US property is set to underperform European property over the next five years. But unlike equities, we think...

The strong recovery in property equities prices across the UK, euro-zone and US implies larger rises in commercial property capital values by the end of the year than we are currently forecasting...

The recovery in euro-zone real estate investment has been weak in 2024, with total activity in the first three quarters little changed on 2023’s near-record-lows. However, prospects for 2025 are...

The gap between downtown and suburban office vacancy rates has widened alarmingly since 2020. This reflects pandemic-driven changes to working patterns, exacerbated by the cyclical slowdown. In our...

The reduction in office demand due to remote work will cause a hit to net operating incomes on a par with, or worse than, that experienced by malls over the last six years. And in line with the...

While rental performance in German commercial property markets has been relatively solid given the country’s poor economic performance over the past five or so years, we think this is set to end.

High interest rates have taken longer to percolate through the economy than we expected, but we now think consumer spending will contract over the next six months. That poses a risk to our retail rent...

Our expectation of rising evidence of distressed assets in 2024 has come to bear, but we think more is still to come over the next couple of years. Some of that will stem from matured loans requiring...

News that some top-rated CMBS in both the US and Europe are set to make losses is in line with our previous view that distress will ramp up in 2024. But, to date, the troubled securities have all been...

While German property yields stabilised in Q1, further indications of rising distress give us confidence in our view that property values there have not yet reached the bottom.

Distress in the US commercial property market is once again in the news, but the risk of that spreading to the UK is low. The rise in aggregate loan-to-value ratios to date looks manageable and with...

Our new forecasts have been compiled in the most uncertain geoeconomic environment for a long time. But our firmly below-consensus expectations for US CRE are led by our view that nearly three years...

The economic outlook has worsened over the past couple of months, which supports our call that the recovery in commercial property will be modest by past standards. Admittedly, interest rates are set...

Following upward revisions to our forecasts for policy rates and bond yields, we have raised our forecasts for prime property yields in Europe and now expect increases of around 20-25bps by the end of...

All-property values have stabilised in the UK but we expect further falls elsewhere, especially in the US. Combined with a weaker office outlook, the US is set to underperform over the next couple of...