US Commercial Property
...

NYC and D.C. to benefit from COVID bounce-back

All major city apartment markets will benefit from the reopening of the economy and reduction in remote work, with rental demand also supported by record low numbers of homes for sale. New York City and D.C., which both saw large falls in asking rents in 2020, stand to benefit most from the return to normal. With less exposure to tech, most jobs in those cities will require workers to come into the office at least part of the time. We expect average total returns in both cities from 2021-25 will outperform the national average of 4.9%. At the opposite end of the spectrum, San Francisco will underperform as tech workers stay away. We expect it will be the only city to see falling capital values in each year from 2021-25, which will push total returns over that period down to around zero.
Matthew Pointon Senior Property Economist
Continue reading

More from US Commercial Property

US Commercial Property Focus

How pandemic changes will affect US metros

Americans are returning to cities, but the return to the office has been much slower. We see suburban areas being net winners in the residential and retail sectors, although the picture for downtown versus suburban offices is less obvious than the national data currently suggest. What is clear is that the winning metros will tend to be cheaper, and in mostly southern states. These will attract newly footloose workers, which will directly support the residential markets in those metros and will also have a positive effect on demand for office, retail, leisure and industrial space. In view of the wider interest, we are also sending this US Commercial Property Focus to clients of our US Housing service

22 October 2021

US Commercial Property Update

Downtown offices not losing out everywhere

National office data suggest that suburban office markets have significantly outperformed downtown offices since the onset of the pandemic. But metro-level data point to a more nuanced picture in which metros reliant on commuting have seen downtown areas hit hardest, but those with a decent share of reverse commuters have seen a more balanced picture. The next 12 months will help to determine whether this is a temporary or longer-term factor.

18 October 2021

US Commercial Property Data Response

Commercial Property Lending (Sep.)

Outstanding real estate debt increased for the fourth consecutive month in September, thanks to net lending turning a corner in the residential sector and accelerating in the commercial sector.

15 October 2021

More from Matthew Pointon

US Housing Market Chart Book

Home demand drops as prices surge

Despite mortgage rates seeing little movement in recent months, mortgage applications for home purchase have dropped to their lowest level since April last year. That implies home sales have further to fall. Booming house prices, which reached a record high 15% y/y in April, and a shortage of inventory are constraining sales. While low mortgage rates mean affordability is still historically favourable, lenders are not easing lending standards and that will be weighing on purchasing power. By contrast, rental demand is recovering as cities have reopened. The recovery in the labour market will cut arrears, and strong earnings will help boost rental growth. Total apartment returns will average a healthy 6% p.a from 2021-25.

7 July 2021

US Commercial Property Outlook

Major Apartment Markets Outlook (Q2 2021)

With cities reopening apartment demand will see a substantial rise this year, boosted by the arrival of households who delayed a move last year. Vacancy rates will fall back in all six major cities covered in this Outlook with those hit hardest during the pandemic, NYC and D.C., enjoying the most vigorous recovery in demand as tenants return. Strong prospects for NOI growth mean yields will either edge back or hold steady this year, driving substantial capital growth in all the cities. Beyond that, a gradual rise in yields and shift to larger apartments will weigh on returns. But even San Francisco, which will suffer from its high concentration of tech workers, should see total average returns of around 5.0% p.a. from 2021-25. At the other end of the spectrum, D.C. will outperform with average total returns of 8.5% p.a.

29 June 2021

US Housing Market Update

Valuations still reasonable despite house price boom

The housing market hit a milestone in April, with real house prices rising above the previous peak recorded during the boom of the mid-2000s. But that doesn’t mean valuations are at dangerous levels. House prices look far more reasonable when gains in incomes and falls in mortgage interest rates are taken into account. With house price growth now set to slow, the prospect of another bubble forming is therefore low.

22 June 2021
↑ Back to top