San Francisco and Seattle values to drop 40% in 2023-25

Further downgrades to our national office outlook have driven corresponding cuts to return prospects in our metro-level forecasts this quarter. San Francisco still has the poorest outlook, with our projections for demand implying vacancy rises by more than 10%-pts from its end-2019 low. Austin will see a similar increase, but its main driver will be a huge swathe of new supply completing over the next few years. The biggest downgrades this quarter are in some of the western cities, with Seattle and Denver of particular note. Indeed, we now expect capital values in Seattle to see a similar fall in 2023-25 as San Francisco. At the other end of the spectrum, southern markets will generally outperform, with capital values in Miami falling by “just” 15% in 2023-25. Dallas and Atlanta are forecast to see slightly better total returns than Miami at just over 3% p.a. in 2023-27, due to their solid income returns.