Falling Values
Commercial Observer
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A recent report on commercial real estate assets paints a pretty bleak picture: Values are expected to decline further, particularly office. On a happier note, food halls continue to catch on nationwide, often as a way to repurpose empty retail space.
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— Tom Acitelli, Deputy Editor
CRE Values Expected To Fall 10 percent Further: PGIM Report
If you think the commercial real estate market has reached bottom, think again. A new report from PGIM Real Estate, has concluded that industry-wide asset values fell 8 percent through the first three quarters of 2023 and can be expected to decline by a further 10 percent in the coming quarters. Most concerning: national office is only halfway through a peak-to-trough decline of approximately 43 percent, decisively larger than the 34 percent decline in value the sector experienced during the Global Financial Crisis 15 years ago. Moreover, the expectation that interest rates will remain “higher for longer” will contribute to persistent gaps in the bid-ask spread between sellers and buyers, according to PGIM.
Why Food Halls Whet Developers’ Appetites
For years, food halls have been a tempting option for commercial real estate developers and investors who hunger for more flexible lease structures and for a delectable option for repurposing often obsolete properties. But this appetite has not been sated. If anything, it has only grown with feeding. The number of food halls in the U.S. has doubled from 150 in 2018 to 352 in 2023, according to Cushman & Wakefield data. The number will soon grow even higher with another 147 food halls currently at some stage of development, according to Richard Latella, executive managing director and retail practice group leader for Cushman & Wakefield’s valuation and advisory group.
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