Offices are still in for a tough few years, with markets like San Francisco, LA and Seattle likely to come out of the downturn with values down 55% or more from their 2019 peaks. However, there are markets, predominantly in the South, where rising office employment and stronger returns to the office are set to keep occupier demand relatively solid. We expect Miami to lead on rental growth, seeing rates of 3% p.a., with Dallas, Houston and Phoenix the next best at around 2% p.a. over the forecast. But we expect Houston to see the smallest capital value fall this year and next, while also benefitting from some of the highest income returns across the 17 markets we forecast. As a result, we are forecasting total returns in Houston to reach 8% p.a. over 2025-28. Miami and Phoenix should be close behind, returning just over 7.5% p.a., with two other southern metros – Dallas and Atlanta – making up the top five.
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