Filtered by Subscriptions: US Commercial Property Use setting US Commercial Property
The performance of the 17 office markets we forecast will continue to be driven by structural factors over the next couple of years. That points to further weakness in the six major markets, where traffic and long commutes are a major drag on office …
20th December 2023
November’s slight resurgence in lending likely temporary Net lending on commercial real estate by banks resurged in November, despite signs from other data that lenders would continue to pull back from real estate lending. That said, the $4.4bn of net …
18th December 2023
Overview – Persistent weak growth and elevated (albeit soon-to-be falling) interest rates continue to spell trouble for real estate values. We see NOI growth softening further over the next year as the industrial rent boom gives way to more “normal” …
15th December 2023
Property yields rose across all sectors in Q3, but this was offset by a sharp rise in alternative asset yields towards the end of the quarter. As a result, all sectors saw a deterioration in valuations, which pushed the retail sector back into the …
6th December 2023
All-property values are down by 12.5% since mid-2022, but we expect an eventual decline of above 20%. Much of the correction at the all-property level is driven by our forecast for cap rates to go above 5% for all-property. For offices, additional drivers …
4th December 2023
In this Global Economics Update , we describe eight of the biggest risks to our economic forecasts for 2024. The unusual nature of this cycle and uncertainties surrounding the transmission of monetary policy mean that the biggest risks relate to central …
30th November 2023
Office-based jobs contracted for the first time in over three years Total employment grew by 0.3% 3m/3m once seasonally-adjusted in October across our 30 metros, which is weak both by this year’s standards and of the previous decade. Meanwhile, …
Even though we expect the Fed to go into cutting mode within the next six months and the 10-year Treasury yield to fall below 4% in 2024, we don’t expect this to provide any respite for real estate. Indeed, given we think the 10-year yield will range …
29th November 2023
Our recent r* work reinforces the view that property yields will stay relatively high longer term. That implies global returns in low single digits over the next decade or so, well below pre-pandemic averages. Our recent Global Economics Focus summarises …
27th November 2023
Since early 2020 there has been a clear divergence in performance between data centers and the traditional commercial real estate sectors. Looking forward, we expect the hyperscale sub-sector will continue to outperform off the back of growing cloud …
20th November 2023
During the past decade, the global economy has transitioned out of an era in which globalisation was the key driver of economic and financial relationships into one shaped by geopolitics. Previously, most governments had believed that closer economic …
16th November 2023
Our forecasts for commercial real estate values remain well below consensus, even after the latest downgrade. While our sector rankings are consistent with the consensus, we are predicting a more substantial rise in cap rates by end-2025, which will see …
15th November 2023
Second month of declining loan balances and plenty more to come The second consecutive monthly decline in outstanding commercial real estate loan balances held by US banks in October means the data are starting to reflect the pullback in real estate …
13th November 2023
With vacancy set to stay elevated, development finance remaining expensive, and values to continue falling next year, we expect construction starts will be weak in all sectors over the next 12 months. This will weigh on completions into the medium term, …
10th November 2023
The bankruptcy of WeWork in the US was a predictable end to a long-running saga. Its effects on office markets will not be systemic, but they will reinforce existing weaknesses and pile more bad news on the sector just at the wrong time. The announcement …
9th November 2023
Office-based jobs at a stand-still for first time in three years September’s employment growth was below the average for 2023 thus far, recording 0.4% 3m/3m across our 30 covered metros once seasonally-adjusted. Meanwhile, office-based jobs remained …
1st November 2023
On the back of upward adjustments to our 10-Year Treasury yield forecasts, we now expect to see a larger increase in cap rates. This will see office cap rates rise to over 6.5% by end-2024, pushing the peak-to-trough price fall for the sector to more than …
30th October 2023
The Q3 RICS survey indicated occupier and investment sentiment fell further in Q3, with the latter reflected in weak investment volumes throughout the summer months. But tight credit conditions and a slowing economy mean the trough in confidence is …
26th October 2023
The -1.4% quarterly return in Q3 meant that there have now been four consecutive negative quarters for all-property total returns. That figure was dragged down by a 5% q/q fall in office values as all-property values fell by 2.4% q/q. That took the …
The diffusion of AI technologies should be a fillip for the global economy over the coming years. That will bring benefits for real estate performance in developed economies, particularly in those office markets with concentrations of knowledge …
20th October 2023
We expect demand to be weakest in the six major markets, but new supply is also set to be low in those markets. Elsewhere, we think southern metros will continue to see stronger absorption, though Austin and Miami have large completions pipelines over the …
18th October 2023
September saw sharp drawback in lending The jump in lending in August proved temporary as net lending to commercial property totalled just $13.5bn in September, below the average for 2023 thus far. This took total outstanding real estate debt to $5.5trn. …
16th October 2023
Overview – The outlook for offices is negative across all markets, but we expect substantial differences across the 17 metros we forecast. We now think Seattle, San Francisco and Austin will see vacancy rise by more than 5%-pts over 2023-25, taking the …
11th October 2023
The sell-off in bond markets has taken a breather today, helped in part by softer data on the US labour market. However, the scale of the moves over the past week has invoked comparisons to previous financial crises that have been caused by sharp moves in …
4th October 2023
IWG’s record revenues in the first half of this year may suggest that flexible offices are the answer for many firms as hybrid working cements itself as the ‘new normal’. However, we don’t think current flexible offices currently offer the right product …
Office-based jobs are on course to underperform total jobs this year for the first time since 2009 and there is a growing risk this could be repeated in 2024, though that is not yet our central forecast. At the metro level, we expect differentials to …
3rd October 2023
New York and LA see a decline in office jobs Total employment growth slowed slightly in August to 0.4% 3m/3m across the 30 metros we cover, once seasonally-adjusted. But office jobs in western cities have continued to decline as layoffs in the technology …
27th September 2023
Overview – With the economy showing signs of slowing and transaction volumes likely to stay low in H2 2023, a tough 6-12 months lies in store for commercial real estate. We still expect cap rates to rise on the back of higher Treasury yields, but the full …
25th September 2023
The bad news around US commercial real estate continues to roll in, but appraisal-based indices have so far only fallen by 10%. How much further do they have to fall, which sectors and regions are most vulnerable, and where is outperformance most likely? …
21st September 2023
Sharp rise in lending in August likely to be temporary The $29.0bn monthly rise in real estate debt held by US banks in August, now at $5.48trn outstanding, was the largest m/m increase in six months. However, we expect this spike to be short-lived, as …
18th September 2023
The recent outperformance of single-family REITs versus apartment REITs appears to be down to differences in the capital value outlook for the sectors, rather than any major difference in rental growth prospects. With our forecasts for single-family and …
15th September 2023
Data on cell phone usage suggest that cities with a high share of professional, scientific and technical occupations and long commute times are typically associated with poorer downtown recoveries. That is in line with our existing views, but also implies …
12th September 2023
Denver’s poor jobs market performance over the last year appears to have been driven by a combination of a downsizing in Central Bank staff and layoffs in its large telecoms sector. But the former’s weakness is likely to be short-lived and the latter has …
5th September 2023
Seattle sees record decline in information jobs in July Employment growth in July was near the average seen in 2023 thus far, at a seasonally-adjusted 0.5% 3m/3m across the 30 metros we cover. But the disappointing performance of information jobs …
30th August 2023
Property yields rose across all sectors in Q2. However, for the retail sector this was offset by rises in the 10-year treasury yield. Consequently retail saw a small decline in valuations, whereas valuations in the other sectors improved. That said, both …
25th August 2023
All-property values are down by 10% from their mid-2022 peaks, but we think there is still another 15% to come by the end of 2024. Much of that price fall will be driven by a rise in cap rates in response to higher interest rates. But, due to the …
23rd August 2023
We continue to expect historic highs for apartment completions in 2023-24 even though there are signs some will be deferred. This also means that, although new permits have dropped back amid softer market conditions and a tougher outlook for investors, we …
18th August 2023
On the back of the remote work revolution, US downtowns have seen reduced office-led footfall and rising crime rates. Cities will need to be proactive to drive conversion to alternative use and to find ways to regenerate what were often thriving areas …
15th August 2023
Total rise in July hides slowdown in commercial lending July saw the amount of outstanding debt secured against real estate rise (albeit marginally) after a sharp drop in June, driven by a strong rebound in residential lending. Across the commercial real …
14th August 2023
The data show a small, but limited, divergence in performance between overall class A and classes B and C office space. But that differential appears to have been driven by newly-built trophy space rather than the broader class A grouping. We expect this …
9th August 2023
Despite capital value falls of 7% and 9% to-date for industrial and apartments respectively, we are forecasting around 15% further value declines as cap rates rise. But the falls in appraisal-based indices appear to be lagging those in the market, where …
3rd August 2023
Office-based jobs suffering in western tech-led markets Seasonally-adjusted total employment growth rose by 0.6% 3m/3m on average across the 30 metros we track for the third consecutive month. But there has been clear weakness in the information sector in …
2nd August 2023
The latest RICS survey signalled a slight improvement in occupier and investment sentiment in Q2, but confidence remained low by historic standards. Tight credit conditions and a poor economic backdrop in the second half of this year suggest sentiment …
27th July 2023
Total returns were negative again in Q2 at -2.0% q/q. This was dragged down by the office sector, where values fell by 7% and quarterly returns were -5.8%, with all other sectors outperforming the all-property number. Nevertheless, we still think office …
26th July 2023
We have made only minor changes to our latest global forecasts which still imply that property will underperform other assets in the short to medium term. Further out real estate returns are set to recover, but, with yield spreads more compressed than in …
19th July 2023
Here are answers to some of the key questions that kept coming up during meetings with clients last week in New York and Chicago, and around my presentation to the NCREIF summer conference in Chicago . How bad will it get for offices? Our forecast for …
18th July 2023
The following is a presentation that Kiran Raichura gave to the NCREIF Summer Conference in Chicago on 12th July, 2023. … What does the new normal mean for real …
17th July 2023
Sharp drop in residential turned total lending negative in June Net lending to commercial real estate (CRE) in June was negative for the first time in over two years, but this was driven by a large drop in residential lending as elevated mortgage rates …
The latest economic and property market data support the view we’ve held since last year that there would be a growing differentiation between southern and western markets. We expect that to persist for the next few years thanks to the relatively high …
11th July 2023
Overview – 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 …
7th July 2023
