We’ve updated our funding gap estimates in light of the dramatic run-up in yields since June. The funding gap for office has now increased to $82.9 billion, and a $21.7 billion funding gap emerged for multifamily properties.
The headlines say it's time to divest U.S. commercial real estate. But Modern Portfolio Theory finds that the optimal commercial real estate portfolio would include more than 50% exposure to U.S. real estate with the balance favoring APAC.
Between 2023-2025, CBRE Econometric Advisors (CBRE EA) forecasts office owners will face a financing gap of $72.7 billion (26.4% of the lending volume originated in 2018-2020). This will likely lead to distress for some property investors and force others to inject more cash into their properties.
The office market has been on its back before. Past experience tells us the preconditions to recovery include a throttling back of the new supply pipeline and painful distress sales that provide necessary price signals.
A CBRE analysis of the relationship between gross and net asking rents over time suggests the spread is driven by changes to operating expenses and inflation expectations. Read the latest article to learn more.
Changing workplace dynamics, accelerated by the pandemic, are further motivating occupiers to prefer higher-quality assets. Thus, CBRE expects Class A absorption to increase substantially, relative to Class B and C, in the coming quarters.