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Archives for June 2022

Three Significant CRE Trends for the Rest of 2022

June 27, 2022 by Marcus & Millichap Research Services

3 Significant Trends That CRE Investors Can Capitalize On

Employment Recovery to Guide CRE Performance

  • U.S. recovered over 95% of jobs lost during pandemic, but recovery has varied by market
  • Cities that re-opened later, such as NYC, Los Angeles, Chicago and Boston, now seeing largest job gains
  • CRE momentum to follow job recovery

Ongoing Migration Patterns Benefit Suburban Properties

  • Much focus was placed on state-to-state migration, but most moves were local and towards suburbs
  • Suburban flight was already in place due to aging Millennials forming families; Accelerated by pandemic
  • Office, Retail and other property types expected to follow

Lifestyle Changes Support Leisure and Entertainment

  • Spending on travel and entertainment expected to increase; Not yet fully recovered but momentum present
  • Led by leisure travel, Hotel occupancy climbed above 60%; Business travel still recovering

*As of May 2022
Sources: Marcus & Millichap Research Services, BLS

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Filed Under: Research Brief

What the Fed Rate Hike Means for CRE Investors

June 20, 2022 by Marcus & Millichap Research Services

What the Fed’s Unexpected Rate Hike Means For CRE Investors

Fed Takes Aggressive Action to Combat Inflation

  • Fed announced 75 bps hike; previously suggested 50 bps
  • Lenders may pass a larger rate to buyers and bake-in another 75 bps increase in July
  • Four more rate hikes are expected in 2022

Housing Market Already Feeling the Impact

  • Average mortgage rates jumped up nearly 50 bps last week to 5.78%
  • Will decrease number of households that can qualify for mortgages
  • Lifts demand for already tight Apartment market; Could translate to greater rent growth pressure

Will Higher Rates Impact CRE Transactions?

  • Some buyers that are dependent on financing may tap out, but enough competition expected to remain
  • Strong rent growth could outweigh higher cost of capital for certain property types and markets

*As of June 16, 2022
Sources: Marcus & Millichap Research Services, Federal Reserve

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Filed Under: Research Brief

Are We In A Housing Market Bubble?

June 13, 2022 by Marcus & Millichap Research Services

Housing Supply Shortage Will Support Apartment Demand

Are We Facing Another Housing Bubble?

  • SF home prices up 15% YOY; Up 38% from two years ago
  • Unlike overbuilding and speculation leading up to Financial Crisis, housing has been underbuilt recently
  • Lack of housing units weighs on household formation, creating pent-up demand and driving price growth

Homeownership Becoming Increasingly Unattainable

  • Leading up to the pandemic, about half of households could afford a median priced home
  • Skyrocketing prices have made the same home affordable to roughly 26% of households
  • Rising interest rates could further shrink this number

Apartments Remain an Affordable Alternative

  • Average Apartment rent remains $638 lower than median home payment; rose at half the rate over last 2 years
  • Housing shortage and demographic trends will sustain low vacancies and rising rents
  • Investors can expect aggressive bidding for Apartment properties despite rising interest rates

*Forecast
Forecast using Moody’s June 2022 baseline forecast
SF=Single-Family, MF= Multifamily
Sources: Marcus & Millichap Research Services, U.S. Census Bureau, RealPage, Inc., Moody’s Analytics

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Filed Under: Research Brief

CRE Investment Overview and Outlook

June 6, 2022 by Marcus & Millichap Research Services

Commercial Real Estate Investment Hit Record Levels

Favorable Fundamentals Drove Record CRE Transactions

  • Elevated market liquidity, strong property outlooks and inflation resistance drew many investors to CRE properties
  • CRE transactions in 2021 exceeded prior peak by 29%; 1Q 2022 sales activity ahead of prior year
  • Placing downward pressure on cap rates

Aggressive Acquisition Climate Fueling Price Surge

  • Office, MT-Retail and Hotels, which were hard-hit but are starting to recover, saw modest price growth
  • Strong demographic trends and favorable outlooks drove strong price appreciation for Apartment and Self-Storage
  • Record transactions fueled outsized Industrial price gains

Will CRE Transactions Maintain Their Momentum?

  • Strong CRE outlook will continue to support property space demand
  • Stock market volatility may push capital to CRE, sustaining further buyer demand
  • Fast rising interest rates could erode some sales activity

*Pre-Pandemic period: 2019 through 1Q 2022; MT=Multi-Tenant
Includes sales $1 million and greater
Sources: Marcus & Millichap Research Services, Real Capital Analytics, CoStar Group, Inc.

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Filed Under: Research Brief, Outlook Report

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This information has been secured from sources we believe to be reliable, but we make no representations or warranties, expressed or implied, as to the accuracy of the information. References to square footage or age are approximate. Buyer must verify the information and bears all risk for any inaccuracies. Any projections, opinions, assumptions or estimates used herein are for example purposes only and do not represent the current or future performance of the property. Marcus & Millichap Real Estate Investment Services is a service mark of Marcus & Millichap Real Estate Investment Services, Inc. © 2020 Marcus & Millichap and Limon Net Lease Group

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