Ahead of the Curve - Real Estate Edition / February 2025
Capital Economics
Capital Economics is an award-winning provider of independent macroeconomic analysis, forecasts and consultancy.
This latest real estate edition of Ahead of the Curve highlights our work on why US appraisals will catch up with reality, why Europe is at greater risk of debt distress, the pushback against working from home, our special series on property after the pandemic and more.?
Read: Covid and real estate – the past five years, the next five years
To mark the pandemic’s fifth anniversary, our real estate team are revisiting their Covid-era assumptions about demand and supply across major sectors to assess how they will perform in the coming five years and beyond. One of the first pieces in a planned stream of work looks at retail’s stunning turnaround from its pandemic depths, but explains why demand will remain a risk over the next decade.
Explore more on our hub page Covid five years on: How the pandemic continues to shape real estate
Read: Mind the gap – US CRE valuations vs transacted prices?
NCREIF’s fourth quarter data again highlights a gap between appraisals and the market correction, with transaction-based cap rates still significantly above those reported in the indices. Our expectation that this gap closes in 2025 underpins our below-consensus forecasts for US commercial real estate returns this year.?
Read: Euro-zone at bigger debt distress risk than UK
One of the most frequently asked client questions is about debt distress. Stabilised capital values and falling rates have fuelled a sense that the worst of the debt refinancing challenge is past, but this analysis makes clear that the UK is better positioned than the euro-zone as lenders on the mainland tighten credit standards and loan terms.
Watch: US, Europe and UK 2025 outlook briefings
Our Drop-Ins are brief online sessions designed to get clients the answers they need in as short a time as possible. Early into the new year, our CRE team held separate Drop-Ins to address the burning questions in the US, UK and European markets. From the impact of higher yields to opportunities across the major sectors, these briefings include the key issues to watch in 2025 and give you a glimpse of what Capital Economics clients are asking.?
Read: Return-to-office headlines obscuring the truth
Stories about the pushback against working from home arrangements make for good clickbait, but is there anything to suggest that office demand assumptions need to be ramped up? Our Chief CRE Economist Kiran Raichura highlights our recent work separating the fact from the hype.?
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