The way commercial real estate investors and tenants perceive market conditions has changed dramatically over the past three months. Today, the Royal Institution of Chartered Surveyors released its Global Commercial Property Monitor for the second quarter of the year, which shows that “cyclical and structural pressures have depressed sentiment among real estate professionals.” Two-thirds of global respondents to the survey now view the commercial property market as being in the downturn phase of the cycle.
The quarter-over-quarter decline across RICS’ indicators is striking, with Q2 returns much more reflective of the disruption caused by the pandemic. The shift in perception for retail is significant and projections for the hospitality industry are also pessimistic because of the sharp drop in traveling and tourism spending. Prices for office assets and rents are set for a period of downward adjustment, but expectations across multifamily are less downbeat than in other sectors. On a more positive note, data centers are likely to outperform more traditional sectors due to the ever-growing digital needs.
Tarrant Parsons, economist with RICS, discusses these predictions in the most recent episode of Commercial Property Executive’s podcast series hosted by Senior Associate Editor Laura Calugar.