Most U.S. CRE fundamentals remain solid

John Greenman

Letter from Denver

Last in a series of “catchup” blog entries on noteworthy articles on U.S. commercial real estate (CRE) that have come across my screen since last February.

I was struck by this headline from the Wall Street Journal: Turning point? U.S. commercial-property sales plunge in February($).

I feel this is alarmist, as it extrapolates from only a few data points. What the broader data tell us, and what in this very piece Jon Gray of Blackstone (perhaps the world’s most successful CRE investor) tells us, is that prices are plateauing.

Debt costs for CRE continue to be affected by volatility in global capital markets, but most market fundamentals remain solid.

What traditionally causes meaningful correction in CRE values is excess new supply. But with the exception of multifamily sector in some geographies and the office sector in Houston, I’m seeing little evidence of overbuilding to date.