Real Estate Outlook – US, Edition 2 - 2022

Growing economic uncertainty based on weaker consumer sentiment and inflation concerns increases the importance of focusing on durable income growth across real estate sectors, metros, and product types. Continued strong industrial and apartment return performance is anticipated, but at a lower margin than 2021, given interest rate pressures. We expect a deteriorating performance for office and a gradual strengthening in retail performance through 2022.

Our first edition of the 2022 Real Estate Outlook saw few signs of the economy slowing. Corporate earnings were healthy, employment was reaching pre-pandemic levels, reasonable wage growth was present, and the supply chain issues were largely unwinding. In one quarter, commodity and energy prices spiked due to the Ukraine war, the geo-political framework is being questioned as it relates to powerful trade blocs and national security, and now the prospect of a soft-landing seems unlikely without the right amount of fiscal planning and support. As other asset classes experienced losses year-to-date, the first quarter commercial real estate data came in strong, bringing the one-year total return to 28.5% – the highest on record for the NFI-ODCE.