Year-end real estate data on property market fundamentals and capital markets gave us much to cheer and reflect on. A strong, stable labor market through 2017 meant that absorption levels stayed healthy and rent growth positive. Beyond that topline assessment, it wasn’t all rosy, and all sectors didn’t go through the year with flying colors. Both the office and industrial sectors experienced a reversal of a seven-year trend of demand outpacing supply. A pickup in construction is coinciding with a slowdown in demand, a trend already underway in the apartment sector for a few years. What has been redeeming for the apartment and industrial sectors is their extremely high occupancy levels, which has softened the impact of the rise in construction. The office sector, however, continues to struggle with absorption levels that don’t measure up to the robust pace of job creation, particularly in the office-using services sector. Retail had, by far, the worst year with negative absorption in nearly all segments, even the vaunted neighborhood/community centers. Negative headlines of store closures and bankruptcies were relentless. Volatility in capital markets and tightening by the Fed are causing investors and lenders to become increasingly selective, even as they seek higher yields.
Source : CBRE Global Investors