Green Street Releases 2024 U.S. Sector Outlooks with Expanded Historical Market-Level Data
Green Street, the preeminent provider of actionable commercial real estate intelligence and analytics, has released its 2024 Sector Outlooks, a series of forward-looking research reports highlighting operating fundamentals and valuations of commercial real estate. To accompany the Outlook reports, Green Street is also now providing downloadable back-up Excel data files and historical time series for market-level effective rent, rent growth, and occupancy data that is continuously updated. The eight comprehensive reports offer deep market-level insight and analysis of the Apartment, Industrial, Office, Strip Center, Mall, Self-Storage, Senior Housing, and Single-Family Rental sectors to help market participants make the most informed capital allocation decisions.
"Following the second consecutive year of declines in commercial real estate values, we enter 2024 with signals that the worst may be behind us," explains Seth Laughlin, Managing Director of U.S. Market Analytics.
"Amongst the traditional sectors, Strip Centers offer the most attractive relative returns with a preference for non-gateway markets Salt Lake City, Nashville, and Austin. The Apartment sector will face headwinds from new supply across most sunbelt markets, while coastal markets are expected to outperform on a relative basis. Despite significant value degradation, the Office sector remains the most unattractively priced traditional sector, justifying an underweight. Within the non-traditional sectors, Senior Housing screens more attractive than Self Storage and Single-Family Rentals. This is due to higher starting yields combined with an exceptionally strong NOI growth outlook over the next 5 years, which has the sector poised to outperform."
Each Outlook includes the following and much more:
- Supply and Demand Analysis: A thorough analysis of the major factors affecting supply and demand dynamics and the risks and opportunities facing the sectors.
- Growth Forecasts: Sector forecasts through 2028 for operating fundamentals.
- Valuation Metrics: A decade-plus of proprietary cap rate and asset value time series data for the sector.
- Market "Tear Sheets": Insights and commentary on fundamentals, growth forecasts, and return expectations for each of the top 50 U.S. metros.
- Submarket Grades: Proprietary grades assigned to over 500 submarkets that represent long-term rent growth potential.
Below are key takeaways from notable sectors:
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Strip Centers: One Step Back, Two Steps Forward
Strip center fundamentals ended '23 on a high note. Despite large tenant bankruptcies and a clouded macroeconomic environment, occupancy for the sector only dipped slightly vs. '22, aided by strong leasing activity and above average tenant retention. Overall, strip center fundamentals remain strong, with M-RevPAF growth (a Green Street proprietary metric combining rent and occupancy) expected to exceed that of other traditional commercial real estate sectors in '24.
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Apartment: Tepid Waters
The apartment market gradually normalized in '23 as the sugar-high from the pandemic faded and demand and supply became more in balance. While the job and income growth backdrops are softer than a year ago, prohibitively high costs of homeownership and a lower propensity for roommates/desire for more space in a post-Covid world will help buttress renter household formations and insulate apartment demand. Green Street's base case for apartments overall anticipates tepid growth, with modest rent decreases over the next 12 months, and moderate growth over the four years thereafter.
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Office: Not a Speedy Recovery
Green Street expects U.S. office fundamentals to remain under pressure in '24 due to further occupancy and net effective rent declines. The sector is expected to improve in '25 and beyond ? albeit only slightly. That said, this will be dependent on the direction of the economy, with Green Street anticipating only a slight recession sometime in '24. Work From Home will continue to be a net negative for office demand long-term, which will act as an offset to higher office-using job growth over time. Performance across markets will likely be vastly different, but U.S. office fundamentals should continue to lag other sectors overall.
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Senior Housing: Positive Momentum on the Horizon
Senior housing operations represented a tale of two halves in '23, with slower-than-expected occupancy gains to start the year, but better-than-expected momentum to close the year that sets the stage for a favorable outlook in '24. Senior housing asset value appreciation has lagged most areas of real estate for the better part of the last decade but seems poised to outperform moving forward.
Request a sample report for more information on Green Street's 12 U.S. and Pan-European Sector Outlooks.
Register now to attend the upcoming webinar on February 14, Identifying CRE Opportunities: A Market-Level Analysis.
To learn more about Green Street's Market Forecasts Tool, click here.
About Green Street
Green Street is the preeminent provider of actionable commercial real estate research, news, data, analytics, and advisory services in the U.S. and Europe. For more than 35 years, Green Street has delivered unparalleled intelligence and trusted data on the public and private real estate markets, helping investors, banks, lenders, and other industry participants optimize investment and strategic decisions. The firm delivers exclusive market information, conclusion-driven insights, and predictive analytics through a SaaS platform. To learn more, please visit www.greenstreet.com.
Green Street's US Research, Data, and Analytics products along with its global news publications are not provided as an investment advisor nor in the capacity of a fiduciary.
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