Skip to Content (press ENTER)
My Account
North America
Canada
Investor Type
United States
Latin America
Argentina
Brazil
Chile
Colombia
Mexico
Panama
Uruguay
Asia Pacific
Australia
Investor Type
China (中国大陆)
Investor Type
Hong Kong (香港 – 中文)
Investor Type
Hong Kong - English
Investor Type
Japan (日本)
Investor Type
Korea
Investor Type
Singapore
Investor Type
Taiwan (台灣)
Investor Type
Europe
Austria
Belgium
Denmark
Finland
France
Germany
Ireland
Italy
 
Luxembourg
Netherlands
Norway
Portugal
Spain
Sweden
Investor Type
Real Estate

U.S. Real Estate: Repricing of Risk Keeps Liquidity Low

November 2023 – 10 min read

Tight financial conditions brought about by monetary policy are causing investors to rethink their yield requirements—and this is putting continued pressure on property prices. The Barings Real Estate team discusses how this backdrop is presenting both challenges and opportunities in U.S. real estate.

Economy
  • The third quarter saw additional evidence of a U.S. economy that—while slowing—is perplexingly steady amid tighter financial conditions.
  • While third quarter data did not demonstrate resurgent inflation, neither did it show that inflationary pressures were receding.
  • The threat of resurgent inflation brought about by armed conflict and other forms of geopolitical tensions combined with increasing systemic risks from overleveraged borrowers and higher rates mean that values and yield requirements are still adjusting amid dislocated capital markets.
  • The probability of a U.S. recession over the next year has fallen from 65% in June to 55% in September. If one does materialize it is not expected to be deep.
Property Market
  • Real estate debt distress, although primarily involving mortgages on office and retail mall properties, is rising in all sectors.
  • Transaction activity, at $89 billion in the third quarter, was down 53% year-over-year. All major property types saw lower sales activity.
  • Continued e-commerce driven consumption as well as supply chain reshoring and near-shoring drove up industrial rents by 9.6% year-over-year.
  • New supply led to a 10 bps rise in U.S. apartment vacancy rates, to 7.0%, but increased demand nudged up year-over-year rent growth by 0.7%.

Want to read the full article?

View PDF

Dags Chen, CFA

Head of U.S. Real Estate Research & Strategy

Lincoln Janes, CFA

Director, Real Estate Research & Strategy

The document is for informational purposes only and is not an offer or solicitation for the purchase or sale of any financial instrument or service. The material herein was prepared without any consideration of the investment objectives, financial situation or particular needs of anyone who may receive it. This document is not, and must not be treated as, investment advice, investment recommendations, or investment research.

In making an investment decision, prospective investors must rely on their own examination of the merits and risks involved and before making any investment decision, it is recommended that prospective investors seek independent investment, legal, tax, accounting or other professional advice as appropriate.

Unless otherwise mentioned, the views contained in this document are those of Barings. These views are made in good faith in relation to the facts known at the time of preparation and are subject to change without notice. Parts of this document may be based on information received from sources we believe to be reliable. Although every effort is taken to ensure that the information contained in this document is accurate, Barings makes no representation or warranty, express or implied, regarding the accuracy, completeness or adequacy of the information.

Any forecasts in this document are based upon Barings opinion of the market at the date of preparation and are subject to change without notice, dependent upon many factors. Any prediction, projection or forecast is not necessarily indicative of the future or likely performance. Any investment results, portfolio compositions and/or examples set forth in this document are provided for illustrative purposes only and are not indicative of any future investment results, future portfolio composition or investments. The composition, size of, and risks associated with an investment may differ substantially from any examples set forth in this document. No representation is made that an investment will be profitable or will not incur losses. Where appropriate, changes in the currency exchange rates may affect the value of investments.

Investment involves risks. Past performance is not a guide to future performance. Investors should not only base on this document alone to make investment decision.

This document is issued by Baring Asset Management (Asia) Limited. It has not been reviewed by the Securities and Futures Commission of Hong Kong.

Contact Us to Learn More.

 


The form was successfully submitted.

There was a problem submitting the form.

 

Any data collected will be processed according to Barings’ Privacy Notice. You can unsubscribe at any time by clicking the link at the bottom of any promotional message we send, or by contacting us using the contact details set out in the Privacy Notice.

 

Related Viewpoints