We expect demand to be weakest in the six major markets, but new supply is also set to be low in those markets. Elsewhere, we think southern metros will continue to see stronger absorption, though Austin and Miami have large completions pipelines over the next few years, which will push up vacancy and weigh on rent growth. But, in the West, we think vacancy will see a huge increase in Seattle, more than doubling to 14% by 2025. That will cause rents there to fall over the next couple of years. Portland is also set to suffer, albeit not to the same extent. The outlook for cap rates remains poor and we expect increases over the forecast period of between 60bps and 180bps, although these will be front-loaded to 2023-24. Those forecasts mean only Austin and Houston are forecast to see a net increase in capital values over 2023-27 with Seattle predicted to see values fall by more than 30%. That means, along with San Francisco and Portland, we expect negative average annual total returns in Seattle over the forecast horizon. In contrast, Austin and Dallas should top the table with average annual returns of around 5% p.a.
Become a client to read more
This is premium content that requires an active Capital Economics subscription to view.
Already have an account?
You may already have access to this premium content as part of a paid subscription.
Sign in to read the content in full or get details of how you can access it
Register for free
Sign up for a free account to gain:
- Unlock additional content
- Register for Capital Economics events
- Receive email updates and economist-curated newsletters
- Request a free trial of our services