With interest rates close to peaking and a surprisingly resilient occupier market, talk has begun about whether the worst of this real estate cycle is behind us. If it is, transactions activity might start to pick up. Some forecasters are penciling in an investment recovery in the fourth quarter. Cycles do turn quickly but such an outlook feels overly optimistic.
The risk that rates remain higher for longer has grown and we are yet to see the well-known lagged effects of higher rates and slower growth on the jobs market.
This quarter, each region takes into consideration the above factors and how the financial markets are impacting the outlook.
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In Asia Pacific, the team examine what the recent stabilisation in lending conditions means for investment activity before exploring the outlook for office markets in a world where, despite firms downsizing, overall office occupier demand is growing.
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In Europe, the team examine the impact that higher debt costs are having on investment activity before estimating how much more values have to fall across Europe. They then look in more detail at the still-popular logistics sector and ask: what could go wrong?
- In the Americas, the team examine what the Fed’s newly released financial conditions index means for real estate. They then evaluate the outlook for metro area apartment rents given the differential impact interest rate hikes are having. The insights finish with a piece by Henri Vuong, PGIM Real Estate’s Global Head of Debt Research, who spells out why he believes that the latest Senior Loan Officer Opinion Survey is a double-edged sword for non-bank lenders.
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