U.S. commercial real estate prices may fall as much as 5% in the next 12 months amid tightened regulations, a wall of debt maturities and property sales by publicly traded landlords, according to a new report released today.
“U.S. Real Estate: A Storm Is Brewing” was released by Pacific Investment Management Co., a multinational investment management firm.
The report, according to Bloomberg, says a global surge in demand for U.S. property investments that pushed real estate values to records may wane as slowing growth in China, lower oil prices and dislocated debt markets threaten to halt six years of price growth.
“Storms form when moisture, unstable air and updrafts interact. Similarly, a confluence of factors—volatility in public markets, tightened regulations, maturing loans and uncertain foreign capital flows—is creating a blast of volatility for U.S. commercial real estate,” the report says.
There may be opportunities in a real estate shakeout, allowing some buyers to snap up properties at bargain prices, PIMCO says. Additionally, a wave of maturing debt from the last decade’s boom starts coming due this year, opening a window for investors to fund borrowers who come up short.
Signs of a cooling real estate market have emerged across the country since the start of the year.
Commercial-property values in big U.S. cities, which have seen the largest increases during the recent boom, have declined 3% in the past three months, Moody’s Investors Service and Real Capital Analytics Inc. said in a June 6 report.
