CBRE: The Monthly Research Roundup | October 4th

The Federal Reserve held the federal funds rate at a range of 5.25% to 5.50% today as expected. Additionally, the Fed affirmed that balance sheet reductions would continue as planned.
A majority of Federal Open Market Committee members indicated that one more rate hike may be necessary this year. Additionally, they expect to lower rates twice next year versus four times in their previous outlook.
Compared with its earlier outlook for 2023, the Fed now expects stronger GDP growth (2.1% vs 1.0% previously), lower unemployment (3.8% vs. 4.1%), modestly higher headline inflation (3.3% vs. 3.2%) and lower core inflation (3.7% vs. 3.9%) at year-end.
CBRE continues to believe that real estate investment activity will remain subdued for the rest of 2023 and begin to recover in the first half of 2024.
We expect that leasing activity will also remain muted but will begin improving along with the economic outlook in 2024.

2023 U.S. Real Estate Market Outlook Midyear Review

Given the resilient economy and persistent inflation, CBRE has pushed back the timing for a potential recession to late 2023 into Q1 2024, one quarter later than our original forecast. We therefore have extended our forecast for a recovery in commercial real estate investment volume and stabilization in cap rates by roughly one to two quarters, pushing expected improvements into 2024. Investment volume is forecast to fall by 37% year-over-year in 2023 and rise by 15% in 2024, while cap rate expansion will continue for the rest of 2023, albeit at a slower rate.

The later-than-expected start to the recession has also pushed to late 2024 the likelihood of overall office vacancy peaking and average rent bottoming out. Continued uncertainty regarding long-term hybrid working arrangements and the economic outlook are causing many tenants to delay leasing decisions. However, the number of tenants currently in the market suggests that leasing activity will eventually rebound once economic conditions stabilize, supporting the start of an office recovery.

Industrial & logistics leasing has surpassed expectations, with total activity on course to reach 750 million sq. ft. by year-end. While higher-than-expected rent growth in emerging markets could push overall rent growth to just under 15% for the year, vacancy rates will increase more than initially expected as tenant requirements continue to lag new construction completions.

Multifamily new construction and absorption levels have surpassed forecasts made at the beginning of the year. Our forecast for annual rent growth has been revised downward from initial expectations, primarily due to lower CPI inflation expectations and a downgrade to our employment outlook.

CBRE’s predictions for the retail market have proven largely accurate, although there have been some slight adjustments to rent growth forecasts as some markets have begun to experience negative absorption and rising availability rates.

Although continuing to improve, the pace of inbound international travel to the U.S. has not met our original forecast due to less-than-expected visitation from China and Japan. This has led CBRE to lower its full-year forecast for hotel RevPAR growth to 4.6% from 6%.

Global Real Estate Capital Flows H1 2023

Cross-regional capital flows between North America, Europe and Asia-Pacific totaled US$30.5 billion in H1 2023, down by 52% from H1 2022.

Elevated interest rates, softer real estate fundamentals and a mismatch in pricing expectations of buyers and sellers limited global investment.

Cross-regional capital flow to Europe from the U.S. fell substantially in H1 2023, causing Europe’s total global cross-regional capital inflow to fall by 68% from H1 2022.

Cross-regional investment in North America increased by 5% year-over-year, primarily driven by two large acquisitions by Asian investors.

Industrial & logistics were the most sought-after assets globally due to their strong supply-and-demand dynamics. They accounted for 37% of all global cross-regional investment in H1 2023, the highest half-year share of any asset type on record.

CBRE expects cross-regional investment volumes to remain subdued for the rest of 2023 before recovering in 2024.

Additional Info

Source : CBRE

Thank you! Please check your email inbox to confirm your subscription.

CBRE: The Monthly Research Roundup | October 4th

CBRE: The Monthly Research Roundup | October 4th

Additional Info

Working Together for Kapolei

Thank you! Please check your email inbox to confirm your subscription.