Southern metros set to outperform

The office sector faces another two years of value falls, led down by Seattle and San Francisco, where cumulative declines will be around 25%-30%. But our latest forecasts highlight the brighter spots in the South. Thanks to a smaller impact from remote work and strong office jobs growth, we expect relatively robust demand will drive continued solid rent growth in Miami, Dallas and Atlanta. (See Chart 1.) That will support capital growth of 3% p.a. in Dallas and Miami in 2026-28, meaning those cities lead the office recovery. But that good news comes amidst a tough backdrop for the sector, with the majority of large office markets seeing weak rent growth at best and average five-year total returns of less than 3% p.a.