Skip to main content

Western and big six metros set for 25%+ price falls

We have made substantial downgrades to our metro-level forecasts this quarter. The outlook for office-based employment growth has been hit by tech sector struggles, weighing on demand in many western markets. We have also pushed through bigger falls in occupied inventory in the worst-hit major markets. In addition, Austin, Seattle and NYC face high levels of completions in the next few years. The net result is that rent growth will be weak across the board, but markets such as San Francisco, San Jose and Seattle will all see outright falls in quoted asking rents. Nevertheless, the biggest impact in all markets will come from a huge increase in yields, which we expect to increase by 110-150 bps in the next two years. This will hit capital values hard. And the combination of large yield rises and falling NOIs means that capital values in San Francisco, Seattle and San Diego will be 25% lower than their end-2022 levels even by 2027. But a better outlook for demand in Atlanta and Dallas should mean the net falls in capital values there are much smaller. Total returns will reflect a similar pattern, with western metros and the six major markets generally underperforming those in the South.

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


Get access