Returns are Expected to Remain Negative in 2010, With Positive Value Growth Foreseen in 2011
Buying Office Space , Office Space , Office Space Negotiations
Boston – January 11, 2010 – The downward slide in total returns from U.S. commercial real estate reached bottom in Q3 2009, but returns will remain in negative territory for most of 2010 before resuming positive growth in 2011, according to a new analysis from CBRE Econometric Advisors (CBRE-EA, formerly CBRE Torto Wheaton).
As measured by the NCREIF1 Property Index, total returns have declined 23% for office, 21% for industrial, 15% for retail, and 23% for multifamily compared with peak levels in 2007. CBRE-EA believes that these declines constitute the bottom of the current cycle across all property sectors, and in the firm’s base-case (most likely) scenario, returns are expected to improve, but remain in negative territory throughout 2010. By the end of 2011, CBRE-EA sees commercial property producing total returns of 3% to 11%.
Total returns comprise the change in the market value of commercial property (appreciation or depreciation), plus cash yields (income)