2022-03-29-牛津经济研究院-US_Real_Estate_Chartbook_Q1_2022_34页_1mb

US Real Estate Chartbook Summary - March 2022

Core Content

The United States real estate market experienced strong performance in 2021, with all-property total returns exceeding 15%. For 2022 and 2023, returns are expected to be 9.7% and 8.5% respectively, slightly above the 20-year average return of 8% per annum. Over the next five years, the US is projected to deliver total returns averaging 7.6% annually, the second highest globally and the strongest among advanced economies.

Key Sectors and Performance

• Industrial Sector: Continues to be a key driver of performance. In 2021, it recorded a record 39% total returns, supported by rising e-commerce penetration and limited availability. Near-term returns are also bolstered by double-digit gains in the hotel sector.
• Retail Sector: Faces structural issues that limit upside potential, expected to be the weakest performing sector over the five-year forecast. A modest rebound is anticipated, with returns expected to peak at 6.2% in 2025.
• Office Sector: Performance remained subdued due to uncertainty around post-pandemic office usage, though some markets like San Diego and Boston saw strong returns driven by their expanding life science sectors.
• Apartment Sector: Strong performance in 2021, with total returns of 63.7%, driven by demand and affordability. It is expected to maintain solid returns over the next five years.
• Hotel Sector: Strong rebound in 2021, with total returns of 13.7%, as the pandemic restrictions eased. However, it is expected to face headwinds in the coming years.

City-Level Performance

• Top Performing Cities: Austin, Philadelphia, and San Jose showed strong returns, with Austin leading at 20.2% total returns in 2021.
• Underperforming Cities: Chicago and Minneapolis consistently underperformed the national average.
• Los Angeles and Riverside/Inland Empire: Industrial performance was particularly strong, with Los Angeles seeing 55% returns and Riverside/Inland Empire nearly 75%.
• Secondary Cities: Expected to outperform major gateway cities and the national average over the five-year forecast, with average annual GDP growth of 3% compared to 2.8% and 2.5% respectively.

Macroeconomic Outlook

• GDP Growth: The US economy is expected to grow at an average of 2.3% annually from 2022 to 2026, in line with pre-pandemic trends.
• Inflation: Persistent inflation is expected, with headline CPI inflation reaching 7% in early 2022. Disinflation is anticipated in the second half of 2022.
• Interest Rates: The Federal Reserve is expected to raise rates by 175 basis points in 2022, with the terminal rate remaining at 2%. This is likely to impact real estate returns, but the market is expected to remain relatively attractive compared to other asset classes.

Capital Markets and Investment Trends

• CRE Investment Activity: Transactional activity surged in 2021, with apartments and industrial sectors leading the way. CMBS issuances reached a post-GFC high of nearly $110 billion.
• Investor Focus: Institutional investors have shifted focus from traditional sectors like offices and retail to growth sectors like industrial and apartments, with a 40% increase in allocations over the past four years.
• Capital Flows: Despite outflows from ODCE funds, institutions remain net investors in CRE. The US real estate market is expected to continue attracting capital due to attractive yields and growth potential.

Demographic and Structural Drivers

• Labor Force Participation: Fell sharply during the pandemic but is expected to rebound. However, the recovery is anticipated to be slower than pre-pandemic levels.
• Population Shifts: Favor sunbelt and Texan cities, where housing is more affordable and taxes lower.
• Sector Rotation: A shift from traditional sectors (offices, retail) to industrial and apartments is expected due to technological advancements and demographic changes.
• Aging Population: Will increase the importance of real estate for recruitment and retention, and stimulate investment in senior housing and healthcare.

Risk Scenarios

• Central Bank Overreaction: Could lead to a 5% reduction in all-property returns by 2023.
• End of Pandemic: Expected to boost growth and returns, especially in consumer-facing sectors.
• Persistent Inflation: Likely to result in subpar growth and a solid reduction in returns.
• Long Covid: May cause moderate economic growth impacts, with all-property returns only marginally below the baseline.
• Alternative Baseline (Russia-Ukraine Conflict): Projected to lower world GDP growth to 3.3% in 2022 and 2.8% in 2023, with greater uncertainty impacting property returns.

Summary of Returns by Sector

Key Insights

• The US real estate market is expected to outperform other asset classes over the next five years.
• Industrial and apartment sectors are leading the market due to strong fundamentals and demand.
• Retail and office sectors are expected to lag due to structural and demographic challenges.
• Capital markets continue to show strong interest in real estate, with REITs and direct CRE attracting significant investment.
• The market remains disconnected from economic fundamentals, with CRE offering attractive returns despite rising interest rates.
• Demographic and technological trends are reshaping the real estate landscape, favoring certain sectors and cities.