All-property values edged down by 0.1% in Q4 but the magnitude of decline narrowed. Appraisal-based cap rates also fell for the first time since mid-2022. However, we still believe appraisals have further to fall given the narrow spread to risk-free rates. That should take the peak-to-trough decline to over 20% by end-2025. At the sector level, we think office values will eventually fall by 45% from their peak. But retail and apartments should be the top performers over 2025-2029.
We suspect southern metros will continue to outperform the six major markets and west coast metros as the South benefits from stronger population and employment growth.
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