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Press release

15 NOV 2018

Majority of New York investors feel commercial real estate is overpriced

The outlook for capital values over the next twelve months remains highly varied across sectors according to a quarterly survey that measures investor sentiment.

RICS’ Global Commercial Property Monitor is a quarterly guide to investment and occupier trends in major global markets.

New York contributors expressed a pessimistic outlook for the next twelve months. With the exception of the industrial sector, capital values are seen declining over the next few months. Sixty-six percent feel commercial real estate in New York is overpriced to some extent. Half the responders in New York felt the market is in the early stage of a downturn.

For the occupier market in New York, RICS members were also pessimistic in their responses. Retail and office rents are expected to decline over the next twelve months. Secondary industrial is the only property segment that has a positive rental outlook.

For the national occupier markets, over the next twelve months, prime industrial rents are expected to post the strongest growth when compared to the other sectors, though expectations have been moderately downgraded since Q2. Expectations for secondary industrial rents were strengthened.

Prime office rents are anticipated to deliver modest gains, while the outlook is flatter for secondary. Retail remains the weakest of the sectors in terms of rental prospects.

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Half the responders in New York felt the market is in the early stage of a downturn.

On the investment side, survey participants across the U.S. were mixed in their outlook for capital values in the national market. Industrial assets are seen to be delivering solid growth, though expectations are lower than they were in Q2. Prime offices are expected to post modest capital value gains and secondary offices are expected to remain broadly flat. Also remaining flat are prime retail values and secondary retail values are firmly negative.

Driving this sentiment, investment enquiries are also mixed. Survey respondents indicated investment enquiries increased firmly across the industrial sector while offices saw a more moderate rise in comparison. Investor demand continued to decline across the retail sector. Foreign investor demand reportedly fell in both the office and retail sectors but remained unchanged for industrial assets.

Nationally, 45% of American survey participants feel commercial real estate is overpriced to some extent and 35% believe the market is in the early stage of a downturn.

For more information about RICS Global Commercial Property Monitor go to rics.org/economics.

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