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Market Opportunities Amidst Revised Outlooks

Off the back of the recently published 2024 U.S. Sector Outlook Reports, Green Street hosted a discussion for those wanting to navigate U.S. real estate markets and make optimal investment decisions ahead. Senior analysts, Rob Filley and Ryan Miller, identified opportunities on the horizon for several commercial property sectors at the market level.  

The two analysts suggested stabilization moving forward for asset values. However, they mentioned there will likely be a couple more quarters of downward revisions to appraisal-based indices like the Nareit MPI. Traditional sector values – Apartments, Industrial, Office and Strip Centers – are down about 21% in aggregate pricing, which the two prefaced as a sign for what’s to come.  

According to Green Street, commercial real estate is roughly fairly valued today. Ryan walked through the methodology behind this conclusion by expanding on expected returns relative to their investment alternatives. He also analyzed expected returns to provide insight on Green Street’s proprietary sector allocation changes specifically for the traditional sectors. 

Rob provided valuable insights on each sector and outlined which markets have fared better or worse than anticipated. In the apartment sector, Chicago, Orange County, and Pittsburgh are each leaders in the top 50 markets due to the strength in fundamentals during 2023. For the office sector, Palm Beach and Miami are poised for near-term growth and high risk-adjusted returns. With lowering cap rates and positive long-term growth, Miami and Los Angeles are expected to thrive amongst the top 50 industrial markets. Salt Lake City strip centers have experienced declining vacancy rates at a much faster rate than most and will continue to benefit from more declines over the next few years. 

u-s-outlook-overlay-cover-strip-1The two analysts also dove into a market allocation analysis of non-traditional sectors. With different markets outperforming across the board, there was an almost an equal number of upgrades and downgrades for Self-Storage, Senior Housing, and Single-Family Rental sectors  in 2023. 

Watch the full webinar 2024 Identifying CRE Opportunities: A Market-Level Analysis to get more proprietary analytics for specific markets in each sector. 

 

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