Filtered by Subscriptions: US Commercial Property Use setting US Commercial Property
Property valuations improved for the seventh consecutive quarter in Q3, following another sharp fall in equities earnings yields. But this was the smallest rise in valuation scores this year and changes so far in Q4 point to a partial reversal. (See Chart …
24th November 2020
Although the economy partially recovered in Q3, it is still operating well below capacity. Lower employment will weigh on the consumer sector over at least the next year. Office and retail have been the hardest hit sectors, with office sub-leasing …
20th November 2020
Virus-driven behaviour changes that support a faster online transition will boost industrial demand over the coming years. But we don’t believe the view that higher online spending will cause rents to detach permanently from the underlying strength of the …
19th November 2020
Rising rental vacancy rates in large cities have not been accompanied by a surge in first-time buyers (FTBs). Indeed, 2020 saw the lowest share of FTBs since 1987. That implies many of those rental households who left large cities are either renting in …
18th November 2020
Commercial property debt stable again as repayments resume Outstanding real estate debt fell markedly in October, but this was fully driven by a drop in residential loan balances. Commercial real estate debt was up only marginally, but the bigger point is …
13th November 2020
Third quarter data make it look increasingly likely that our year-end price forecasts will prove to be too negative. However, with the UK still on course for a capital value fall of close to 10% this year, this doesn’t necessarily mean that the US or …
12th November 2020
Cities with a large tourism sector, such as Las Vegas and Orlando, still employ 10% fewer people than they did in February, which will hurt retail spending and apartment demand. And, while office-using jobs are holding up in tech-led cities, these have …
10th November 2020
The volume of available sublease space already exceeds that seen in the last two downturns. And an average discount of 20% to landlord asking rents, rising to 30%-plus in some cities, will reduce the demand for available landlord space. As a result, while …
4th November 2020
Surveyor sentiment still weak, but industrial outlook strengthens again Occupier market sentiment remained at cyclical lows, but there was a small sign of improvement in the investment market. But we expect that only to be short-term respite, as the …
29th October 2020
Returns improve in Q3, but significant risks to values ahead All-property total returns moved positive again this quarter, as valuation downgrades reduced markedly. A lack of forced sellers has limited transaction activity and reduced observable evidence, …
27th October 2020
Strongest month since virus onset, but unlikely to last The RCA Commercial Property Price Index for all-property nudged higher in September, driven by improvements in the office and apartment sectors. But, with the exception of the industrial sector, …
23rd October 2020
Outstanding commercial real estate debt held by banks is likely to rise again in the coming months, providing the improvement in investment transactions seen in September continues. Yet even if there were renewed lockdowns, the deferral of loan payments …
22nd October 2020
The industrial sector could see a further increase in its share of investment in the coming quarters thanks to both its own resilience and concerns surrounding the other sectors. Those diverging prospects are likely to mean that the negative yield gap …
19th October 2020
Upgrades to 2020, but consensus more downbeat on 2021-22 Consensus forecasts for this year have been revised upwards, although the outlook for total returns remains negative. At the same time, the prospects for 2021-22 have been downgraded, but only …
14th October 2020
Retail has been hit hard by the COVID-19 crisis and lasting changes to online spending will bring further pain. While our estimates suggest that the impact is likely to be less severe than structural change in offices, the rental outlook is expected to …
8th October 2020
While Joe Biden is currently favourite to win the election, we don’t think the winner’s identity will have a major effect on the economy. We also don’t expect it to substantially alter the prospects for the asset class as, in either case, monetary policy …
7th October 2020
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 …
2nd October 2020
While we continue to think that this year’s property downturn will be milder than in past cycles, next year’s recovery is looking more fragile. This in part reflects revisions to our economic view, but also structural changes which are weighing on the …
1st October 2020
Commercial property has outperformed both Treasuries and equities in the last two decades, but the fast-forward of structural change caused by COVID-19 will mean that in the next decade property is again likely to underperform equities. Over the last two …
25th September 2020
Low utilisation of office space supports our expectations of weak short-term demand. And, despite some firms raising concerns over productivity as the current remote work “experiment” continues, there are good reasons to think that these will not have a …
23rd September 2020
Overview – While we expect the economic recovery to continue, there are downside risks in the next couple of years, particularly in the consumer sector. This will weigh on retail property, which we expect to be the worst-performing sector. The major …
21st September 2020
Non-bank lending may explain drop in outstanding residential debt Total real estate debt held its ground in August, as a rise in commercial debt was offset by a drop in residential. The rise in the former can be explained by rent arrears, particularly in …
11th September 2020
Even after the immediate threat of COVID has receded, we expect as many as 50% of office-based employees will work from home at least once a week. But the move away from cities and toward the suburbs should prove short-lived. Most of those leaving cities …
9th September 2020
In contrast to the surge in mortgage forbearance following the CARES Act, we doubt the recently announced eviction ban will trigger a jump in rental arrears. For those who can afford it, deciding not to pay the rent still comes with significant costs. …
4th September 2020
Commercial real estate transactions are on course to fall by nearly 50% this year, despite a strong Q1. And with the latest data hinting that our downside scenario is now looking more likely, volumes could still end next year 40% lower than before the …
3rd September 2020
Retail malls are set to fare badly in this downturn as Americans avoid enclosed spaces and adopt online shopping practices. But regional and super-regional malls, which were already underperforming before the outbreak as tenants shuttered stores and …
28th August 2020
Given uncertainty around the level of adoption of remote-working, change in space allocated per worker and how large any reduction in supply might be, we provide a set of potential scenarios for the change in required office space and the effect on …
24th August 2020
Property valuations improved substantially in Q2, on the back of a huge 120 bps drop in equities earnings yields. However, while the office, retail and apartment sectors look undervalued on our valuation measure, with income streams likely to fall over …
20th August 2020
Loan payment deferrals in worst-hit sectors could be clouding the picture July’s increase in real estate debt was mostly driven by residential loans, but commercial property debt also ticked higher. However, with investment totals weak in Q2, this could …
14th August 2020
Occupier demand slowed further in Q2 and although completions were exceptionally weak, vacancy rose in most sectors. As a result, rental values fell in the office, retail and apartments sectors, while industrial rents only nudged higher, with the weakest …
We think that the enforced remote-working experiment of recent months will cause a dramatic demand shift in the office sector, with as many as 50% of office-based employees working from home at least once a week. Even with a heroic supply response through …
6th August 2020
We expect office-based employment growth to be faster than total employment growth by around 0.3-0.5% ppts each year over the next decade in the US, the UK and the euro-zone. The coronavirus crisis will dampen the outlook in the short run, but the less …
4th August 2020
Office and retail sentiment deteriorates, industrial bounces back Commercial property agents reported a worsening in activity and forward-looking sentiment for both the office and retail sectors this quarter. In contrast, there was a sharp improvement in …
30th July 2020
Returns fall sharply in Q2, with more pain expected in H2 As expected, all-property total returns turned negative in Q2, led lower by sharp markdowns in the retail and hotel sectors. And, while rental values and capital values fell in all sectors last …
27th July 2020
Despite the stronger-than-expected rebound in US high street sales, retail property still faces greater uncertainty than any other commercial sector. Not only does the upsurge in virus cases present a renewed near-term risk, but the inexorable rise in …
23rd July 2020
Debt covenants generally look less stretched in this downturn than during the GFC. And, although interest cover ratios are relatively low in some REIT sub-sectors, the short, sharp, fall in capital values that we are forecasting means that it is unlikely …
16th July 2020
Global property markets are expected to see a lasting impact from the effects of the COVID-19 outbreak. Over the coming weeks, we will publish a series of pieces looking at the post-pandemic future across the main property types. We start this by …
15th July 2020
Commercial property lending weaker again as transactions slow markedly Total debt secured against real estate nudged lower again in June. More timely weekly data point to signs that residential lending has already begun to grow again as housing demand has …
10th July 2020
CMBS delinquencies have risen sharply in recent months, yet we aren’t expecting a repeat of the real estate debt meltdown witnessed in the GFC. However, non-performing loan rates are especially high in the retail and lodging sectors, meaning that holders …
8th July 2020
We expect real estate yields to spike this year due to both a rise in the property risk premium and lower expectations for property income streams. However, breaking down the observed yield gap into rental predictions and the risk premium has more than …
2nd July 2020
The hit to apartment absorption from the coronavirus has occurred at the same time as a large number of new units are set to enter the market. Even with current tenants staying put, that raises the risk of a spike in the vacancy rate. However, …
1st July 2020
It is by no means inevitable that the coronavirus crisis puts a big permanent hole in the supply capacity of economies (i.e. their ability to produce goods and services). With the right government policies, many economies should be able more or less to …
29th June 2020
With the largest fall in occupier demand expected in New York City (NYC) and San Francisco (SF), and completions staying relatively strong in Los Angeles (LA) and SF, we expect these cities to see the largest rental declines and yield rises this year. On …
26th June 2020
Overview – In the absence of a full-on second wave of the virus, we expect a strong economic recovery in the second half of the year and into 2021. Nevertheless, we expect occupancy to fall this year as absorption turns negative in most sectors, prompting …
17th June 2020
Commercial property lending started to fall in late May Debt secured against real estate fell in May. While this was mostly driven by a decline in outstanding residential loans, weekly data show that debt secured against commercial property flattened out …
12th June 2020
The factors that drove the resurgence in home purchase mortgage demand, including record low mortgage rates, the need for more space and the anticipation of finding a bargain, will not give a similar boost to apartment rental demand. Low interest rates …
11th June 2020
As US states emerge from lockdown and the worst of the economic crisis appears to be over, thoughts are turning to the recovery. In this, not all parts of the US will be equal. Some insight into the resilience of markets can be gained by looking at …
5th June 2020
In a world in which central banks and governments are likely to ensure that sovereign bond yields stay low for the long-term, real estate is well-placed to benefit. Therefore, although we expect property yields to rise this year, we still expect …
4th June 2020
The partial recovery in REIT prices since their late March trough gives further support to our view that all-property capital value falls will not exceed 10% this year. But, with data centres, single-family homes and self-storage outperforming in recent …
29th May 2020
Property valuations improved markedly in Q1 thanks to a more-than 120 bps fall in Treasury yields as investors flocked to safe-haven assets. This marked the fifth consecutive quarter of improving valuations, with the apartments and retail sectors nudging …
27th May 2020
