Research Briefing | Jun 28, 2023

Sector challenges remain for US commercial real estate in the near term

We expect the intensifying headwinds from higher interest rates, tightening lending standards, and weakening economic conditions to result in a near-term pricing correction and reduced returns for US commercial real estate.

What you will learn:

  • Office returns are expected to record the steepest declines in 2023. For the second year in a row, we are projecting total returns in the office sector will be the lowest among the main property types.
  • While we expect returns to rebound over the latter forecast years, capital growth will be sluggish, with downside risks adding further uncertainty to our forecast.
  • There are several risks to our baseline forecast, particularly tighter credit conditions and an asset price crash.
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