Absorption is falling in all markets and vacancy is ticking higher, particularly in D.C. and San Francisco (SF). But more pain is to come, and we have significantly downgraded our forecasts for the next few years. SF has already seen a 60bps rise in vacancy, but worse is in-store, with sub-lease availability skyrocketing. We think asking rents and capital values there could fall by a cumulative 7% and 17% respectively by end-2022. NYC will also fare relatively poorly, with values down around 12% in the same period. On the other hand, we still see demand holding up better in Boston, Chicago and Washington D.C. As a result, we think total returns in those cities will outperform at 2%-3%p.a. in 2020-22.
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