Filtered by Subscriptions: US Commercial Property Use setting US Commercial Property
The wide divergence in global office market performance to-date has been driven by significant differences in the return to office and the impact that has had on occupiers’ leasing decisions. US markets have been the major losers, while those in …
29th April 2024
While the headline of the Q1 NCREIF NPI data (-0.9% q/q total return) suggests we could be near the end of the price falls, we think this simply stored up bigger falls for the rest of the year. The growing share of underwater loans, as well as the far …
26th April 2024
While overall surveyor sentiment remains negative, the Q1 RICS survey appeared to show a divergence in views between respondents of where in the cycle the market currently is. We think the apparent differences in views stem from the growing discrepancy …
The latest e-commerce statistics suggest that the pandemic has left US online sales on a permanently higher trend. That will be bad news for retail rents generally, though the detailed data also hint that there may have been a return to physical shopping …
23rd April 2024
The latest consensus figures have moved closer to our own total returns forecasts for the next three years. But they continue to expect a lower path for Treasury yields implying a smaller cap rate rise than us, which we think underpins the divergence …
9th April 2024
Note: We’ll be covering our views on residential market winners and losers in both the for-sale and rental markets in a Drop-In Tuesday 16th April 1100 EST/1600 BST . Register here for the 20-minute session. As mortgage rates fall, we think the …
25th March 2024
Our updated remote worker preference scores again highlight Nashville as the most attractive metro for remote workers, while San Jose is the least attractive. The winners continue to be predominantly in the South, reflecting relatively low living costs …
13th March 2024
Commercial real estate investment saw its worst year in over a decade last year. Most brokers seem to expect a recovery in investment activity this year as the Fed cuts interest rates and distressed assets come to market. However, we think the effect of …
5th March 2024
The resilience of the US economy in this cycle means the rise in distressed assets has been much slower than in the GFC-era recession, as relatively few firms have gone bust. But the structural adjustment in office demand will ultimately have a similar …
29th February 2024
Following the huge fall in multi-family starts in January, we suspect the apartment sector will continue to be a drag on new development this year. But construction of single-family dwellings will remain strong. In January, housing starts suffered their …
19th February 2024
While we expect the office and multifamily sectors to account for the lion’s share of distressed assets over the next couple of years, there is an important distinction between the two. Unlike multifamily, we expect impacts on offices to be widespread, …
15th February 2024
Recent headlines have drawn attention to the immediate risks facing multifamily investors and lenders. While we think this concern is appropriate, we think the biggest risks face assets financed at historically low fixed rates in 2020-21. Problems are …
5th February 2024
We think the recent divergence between the BLS measure of apartment rents and other sources is due to reliability issues with the former, which we expect will be revised higher in future releases. Therefore, while it currently points to a downside risk to …
31st January 2024
Typically, US REIT price indices have been a good indicator of the growth path for capital values in the direct market. That said, even though REIT prices rebounded in Q4 2023, we don’t expect the direct market to follow any time soon as the property …
30th January 2024
The worsening in total returns to -3.0% q/q in Q4 was consistent with our expectations of bigger-than-average year-end markdowns. But the major takeaway was that the data and NCREIF’s release notes support our view that there will be growing distress and …
29th January 2024
The Q4 RICS survey suggested that occupier and investment sentiment remained pessimistic in Q4. We expect sentiment will be subdued in at least the first half of 2024, with credit conditions staying tight and growing signs of distress, particularly in the …
25th January 2024
We expect evidence of distress to ramp up this year as loan extensions end. Many borrowers will be forced to either inject new capital, return assets to lenders or sell into a soft market. Those assets returned to lenders will also ultimately end up on …
22nd January 2024
We are downbeat on industrial total returns over the next two years compared to the consensus because of our relatively pessimistic views on both rents and cap rates. And we think the risks to long-term returns are skewed towards the downside, which, if …
16th January 2024
Our total returns forecasts for 2024 are significantly below consensus, as we predict that value falls will reach double digits for the second consecutive year. Retail stands out as the only sector where we expect positive returns, but distress in the …
9th January 2024
While SVB’s collapse in March and sharper rises in interest rates led to larger-than-expected falls in commercial real estate (CRE) values, our expectations for sector and regional winners were broadly correct. A year ago, we outlined our key calls for …
3rd January 2024
We expect the sharpest fall in apartment completions in 2025-26 in Boston, Denver, NYC and Seattle. Those cities will also be joined by Sunbelt markets where oversupply is already denting rents, including Austin and San Antonio. By contrast, there is …
28th 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
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
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
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
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
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
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
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
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
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
We recently held a Drop-in titled “Industry’s decarbonisation challenge – From aviation to property”, which you can view on-demand here . This Update addresses some of the questions we received during the event, including those that we did not have time …
3rd July 2023
The reduction in office demand due to remote work will cause a hit to NOIs on a par with, or worse than, that experienced by malls over the last six years. And in line with the experience of malls, the structural nature of this hit to demand means the 35% …
22nd June 2023
The latest MSCI data indicate that values in western European office markets have held up better since the start of the pandemic when compared with the US and UK. But given these cities face similar long-term problems, we remain downbeat about the …
16th June 2023
Florida and other parts of the Sunbelt (notably major cities in Texas) will likely face the most severe physical climate risk over the next 30 years. While this is unlikely to come as a major surprise, we don’t believe that this risk is being consistently …
14th June 2023