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Colliers Asks: Is it the Last Hurrah for U.S. Property Markets?
U.S. property markets staged a healthy, albeit surprising, comeback in 2018. Yet, the latest research by Colliers International ponders whether that was a last gasp of a late market cycle, or a precursor to an extended runway with a softer landing ahead in 2019.
Sale transactions surged 15% over 2017, recording the second-highest volume of this cycle and reversing two straight years of declines, according to Colliers. Researchers pointed out in Colliers’ 2018 Capital Flows Year-End Review and Outlook Report, that continued vigor is expected in U.S. property markets on the strength of robust operating fundamentals, economic out-performance relative to every other advanced economy, and still-compelling property returns. They say that makes the U.S. an attractive investment for off-shore and domestic investors alike.
Yet, Colliers Chief U.S. Economist Andrew J. Nelson writes they “fully expect transaction volumes to resume moderating, and price appreciation and property returns to continue easing, as the U.S. economy slows this year and especially into the year 2020. Our base case now calls for the U.S. economy to at least temporarily avert recession with a “soft landing,” which should support prices at current levels, but the slowing economy will take some of the loft out of real estate capital markets.”
Among the key report takeaways were:
- Every major property sector registered year-over-year gains and rose more in 2018 than during 2017.
- Multifamily again led all sectors in total volume, followed by office, but retail surprisingly posted the largest gains in market share among the four major property types, while hotels boasted the biggest annual gains of all, and senior housing sales fell sharply.
- Investors continue to shift capital from primary into secondary markets particularly for foreign investors, who feel increasingly confident seeking greater returns outside the top markets.
- However, reversing trends from previous years, CBDs gained at the expense of more suburban products: sales of CBD offices and especially high-rise multifamily buildings rose sharply, while garden apartments were flat and sales of suburban offices fell.
- Pricing remains strong as values increased in all major sectors compared with a year ago, led by apartments and industrial, while office also posted solid gains, though prices of CBD offices fell in the top markets.
For comments, questions or concerns, please contact Dennis Kaiser
- ◦Sale/Acquisition
