CBRE Survey Reveals Anticipated Stabilization of Commercial Real Estate Prices

According to a recent CBRE survey, commercial real estate prices have begun to stabilize as inflation has moderated and the Federal Reserve is nearing the end of the interest rate hike cycle.

CBRE's survey of major U.S. property types found that the capitalization rate has begun to plateau after a sharp rise in the second half 2022, as investors adapt to the new higher rate environment. Commercial real estate prices are expected to stabilize in 2023. Office property values will not be reached until 2024.

Tom Edwards is the Global President of Valuation & Advisory Services at CBRE. He said: "We are starting to see signs of stabilization in the investment market after a period of rapid cap rate increases. If inflation stays under control and the Fed does not continue to lift rates, investor confidence should improve, leading to more stable pricing and increased liquidity by mid-2024."

CBRE's study, which examined investor sentiment regarding market conditions and capitalization rate for stabilized properties revealed several key findings. Capitalization rates, also known as cap rates, measure property returns by dividing annual income by sale price. A lower cap rates generally reflects a higher property value.

Retail cap rates increased the least in response to strong fundamentals, income increases and attractive pricing.

The cap rates for multifamily units also increased modestly. However, there are still concerns about oversupply in certain markets.

The industrial cap rate has increased moderately as a result of more conservative underwriting.

Investors sought higher discounts as a result of persistent challenges in this sector.

CBRE's U.S. Cap Rate Survey (CRS) H1 2023 was conducted from late May to early June 2023. It reflects the transaction activity of the first half 2023. The CRS is a good baseline for understanding investor sentiment, even though market conditions can be fluid. The CRS gathers over 3,000 estimates of cap rates in more than 50 geographical markets, allowing it to provide key insights from an abundance of data. Please note that over 200 CBRE real-estate professionals have completed the H1 Cap Rate Survey 2023. Estimates may not reflect the most recent market conditions or recent events, given the rapidly changing conditions of the capital markets. All cap rate estimates should be viewed in this context.

Source: hotelnewsresource.com