Where are the risks from US commercial real estate greatest?

While we expect a more-than 20% peak-to-trough price correction for US commercial real estate, offices face a much tougher outlook, with large falls in net operating incomes compounding the broader re-pricing facing the sector and driving a peak-to-trough price fall of over 30%. Regionally, we expect the greatest pain to be felt in San Francisco, where office values could see an average peak-to-trough fall of 50% and apartment values face the biggest fall. But we also think office markets such as Chicago, Los Angeles, New York City, Washington D.C. and Seattle will suffer larger than average price falls.