Third quarter data showed growing evidence of a softening in tenant demand in many metros. In particular, demand appears to be slowing in a number of West Coast markets, as hybrid and remote work becomes embedded in work patterns and the cost of real estate in those metros causes tenants to look elsewhere. Southern metros continue to outperform, led by Austin – the only city we cover in which both office and apartment capital values grew in Q3 – and Dallas. In the industrial sector, Riverside capital values were up by more than 100% since the start of the pandemic on the back of huge rises in rents and sharp falls in yields. But we expect some of the sector’s gains to unwind over the next 12-18 months as yields rise to reflect the higher cost of capital. Markets where rental growth is particularly weak, such as Chicago, Cleveland, Minneapolis and Seattle, stand to see the greatest yield rise.
Become a client to read more
This is premium content that requires an active Capital Economics subscription to view.
Already have an account?
You may already have access to this premium content as part of a paid subscription.
Sign in to read the content in full or get details of how you can access it
Register for free
Sign up for a free account to:
- Unlock additional content
- Register for Capital Economics events
- Receive email updates and economist-curated newsletters
- Request a free trial of our services