GlobeSt: CRE Pricing Outlook Brightens
According to GlobeSt: With the first quarter’s turmoil in the global financial markets now in the rear-view mirror, Green Street Advisors said Wednesday that its outlook for commercial property prices is now noticeably brighter. “The forecast has changed quite meaningfully over the past six months,” Andy McCulloch, managing director of real estate analytics for Newport Beach, CA-based Green Street, said in a webinar last week providing a mid-year update on commercial real estate fundamentals and valuations.
McCulloch says that Green Street’s Commercial Property Price Forecast was sending “some very bearish signals from October of last year through this spring.” He adds, though, “The recent rally in the corporate bond market and rebound in REIT share prices has private market real estate looking more attractive. We wouldn’t go as far as calling real estate cheap today, but it does appear more fairly valued on a relative basis.”
During last week’s webinar, McCulloch offered Green Street’s assessment of where we are in the cycle in terms of the ever-popular baseball analogy: the sixth or seventh inning with regard to operating fundamentals. He noted that aside from shopping malls, of which there are “clearly too many,” all property sectors are seeing growth in revenue per available square foot coming in ahead of inflation.
That being said, he noted that the current state of valuations can vary by sector. Self-storage values are “on a tear,” McCulloch said, while in hotels, “we believe values have taken a step down.”
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