The disruption wrought by COVID-19 to global markets will continue to abate this year, according to Cushman & Wakefield economist Kevin Thorpe – and several indicators will be top of mind for occupiers and investors alike as the economy recovers.
Chief among them? Multifamily household formation will continue to drive demand for units in the sector. Thorpe predicts that US household formation will surge up to 40% above the historical average in 2022 and 2023.
“Home prices and rents exist in equilibrium,” Thorpe says. “Watch for home price growth to slow down generally (it’s already begun) while rent growth persists and accelerates in lagging markets.”
Thorpe also predicts that investor diversification will take center stage: multifamily and industrial logistics now account for more than half of total global sales volume, up 30% from a decade ago, and yields continue to hit record lows. He advises investors to watch for a “partial normalization” of market activity becoming more apparent in the latter half of this year and picking up steam into 2023.
Sustainability will also continue to shift to the forefront, Thorpe says. He says to watch for “stranded assets”: “we will start to see buildings that do not meet ESG requirements of investors or occupiers,” he says. “The cost to retrofit some buildings will be too high to deliver value.”
Nearly 40% of global CO2 emissions come from the build environment, with 28% stemming from operational aspects and 11% from the carbon created during builds.
And believe it or not, confidence will return to the office market. Cushman data shows that in 2021 businesses began signing longer-term leases again, a sign Thorpe says shows that confidence in the sector is picking up speed. US leases signed for more than 10 years made up 32% of leasing activity in the fourth quarter. Thorpe predicts occupiers will continue to try to lock in favorable terms for the long-term before fundamentals recover.
Finally, Thorpe predicts retail will rebound.
“Although the initial impact of stimulus is behind us, households accumulated savings during the last two years to further support retail growth in 2022,” Thorpe says. “Stronger wage growth and a favorable job market will bolster a broader recovery across retail property markets as the travel, dining and entertainment sectors spring back to life.”
Source: GlobeSt.
