Since the early 2000s, more people began favoring walkable urban environments over traditional suburbia. Surprisingly, this shift to urban living did not cause CBD rent growth to outpace the sleepier suburbs.
Commercial real estate is often thought of as a reliable inflation hedge. However, real estate’s ability to hedge inflation is not a foregone conclusion. Each cycle is different, and each property type will respond to macro trends in different ways.
Multifamily fundamentals weakened in Q4 2020 as COVID-19 continues to take a toll on the U.S. economy. The vacancy rate for our national sample of properties increased to 4.5%. Average monthly rents posted their largest Y-o-Y decline in 10 years, falling 4.2%. The supply pipeline remains strong, with stock growing a healthy 1.7% Y-o-Y.
A gap in buyer and seller expectations led to low transaction volume in 2020. However, due to ample liquidity and investors’ mostly positive outlook on commercial real estate (CRE) fundamentals, the cap rates in 2020 remained relatively stable across the apartment, industrial and office sectors. Assuming widespread availability of a vaccine in 2021 and mass immunization, we expect commercial real estate to rebound and generate solid income, despite the office and retail sectors potentially facing lengthier impacts.
With the pandemic continuing to affect the U.S. economy, investors are wondering what's in store for commercial real estate. Our investment performance forecast viewpoint explores the outlook for each property sector, cap rates, the lending market and more.
After years of winding down its balance sheet, the Federal Reserve announced last Fall that it will restart the purchasing activity. While the FED didn’t specify how much it is willing to purchase, besides stating short-term goals, CBRE Research projects that the FED balance sheet could eclipse its previous high in the next 10 years.
The tax benefits of renting a home vs. buying will increase in 29 of the 35 largest U.S. markets—up from 15 markets before tax reform. Limitations on state and local tax deductions and the loss of the mortgage interest deduction on home purchases above $750,000 will marginally impact housing costs in high-cost markets, but will have negligible impact on population flows. The overall economic impact should be positive, but it's uncertain for how long, given the reform's late-cycle timing and the question of whether corporate tax savings will be sufficiently reinvested to cause job growth...
In maintaining a historical time series of real estate stock, the industry standard approach is to calculate past quarters' stock levels by subtracting buildings from the current level according to their ages. This method doesn't account for buildings that were demolished, however, so the standard measure of historical stock is, by definition, an underestimation. To see if we can address this, we are developing a “gross” stock series that adds back...
With weakness in most segments, February retail sales disappointed. Delayed tax refunds and immigration policy may have contributed to the weak retail sales—the latter a particular source of concern for retailers in markets with large immigrant populations. Policy on immigration and the economy may represent the greatest risk to retail markets over the coming quarters.
Every economic recession has its unique origins, but it can also usually be characterized by the macroeconomic scenario that sparked it. The three scenarios that typically cause recessions have unique impacts on individual markets and property types and are the key to understanding how your portfolio will weather recessions to come.