US Commercial Property Outlook: More capital value falls to come in all sectors this year

We think the short-term outlook for capital values is poor, with valuations looking stretched across all measures. This does not appear to be reflected in other forecasts, meaning our forecasts for the next two years remain significantly below both the PREA and ULI consensus figures. At a sector level, we still expect industrial to see the best rental growth, followed by apartments. But even with the positive structural stories surrounding both sectors, we think the prospects for values and returns are weak in the next few years. Instead, we think retail will be the top performer for total returns over the 2025-29 forecast, at 7.5% p.a., with offices, perhaps surprisingly, coming in second. Indeed, over 2026-29, it is offices that we think will produce the best returns – approaching 8.5% p.a. – as the sector stages a recovery in the later years of the decade.