With prices down 20% from the April 2022 peak,1 there may be a buying opportunity in commercial real estate. Plus, occupancy rates for most property types are in good shape from a historical perspective despite being tested during the past three years of higher interest rates. In contrast to low historical occupancy rates in the office sector, occupancy rates in several residential and consumer-driven sectors including single-family rentals, apartments, industrial, non-mall retail (strip centers), self-storage, and medical office look attractive compared to the end of the Global Financial Crisis (GFC), which was the last time real estate emerged from a period of repricing, and long-term averages.
After significant repricing, current occupancy conditions across most real estate property types (other than traditional office) are in a great starting place compared to the start of the post-GFC recovery and appear favorable compared to long-term averages.
Source: Green Street’s Commercial Property Price Index for core sectors (apartments, industrial, office, and retail). The percent change in this index from the April 2022 peak to January 2025 is -19.8%.
The public REIT market can serve as a leading indicator for the private property market, so we believe private US real estate is poised for recovery.
Historical increases in US industrial rents have out-performed past trends. Can that run continue? We look at e-commerce and interest rates for an answer.
A US and global real estate recovery with transaction activity re-accelerating and the start of a new real estate value cycle is close in our view.
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Past performance does not guarantee future results.
Green Street's Commercial Property Price Index (CPPI) is a time series of unleveraged U.S. commercial property values that captures the prices at which commercial real estate transactions are currently being negotiated and contracted, emphasizing timeliness and high-quality properties.
The opinions expressed are those of the author as of January 2025 unless otherwise state. They’re based on current market conditions and are subject to change without notice. These opinions may differ from those of other Invesco investment professionals.
Forward-looking statements are not guarantees of future results. They involve risks, uncertainties and assumptions, there can be no assurance that actual results will not differ materially from expectations.
The value of investments and any income will fluctuate (this may partly be the result of exchange rate fluctuations) and investors may not get back the full amount invested. Property and land can be difficult to sell, so investors may not be able to sell such investments when they want to. The value of property is generally a matter of an independent valuer's opinion and may not be realized.
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Investing in commercial real estate assets involves certain risks, including but not limited to tenants' inability to pay rent; increases in interest rates and lack of availability of financing; tenant turnover and vacancies; and changes in supply of or demand for similar property types in a given market.
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