Executive Summary

  • Unlike the aftermath of the global financial crisis, when U.S. real estate values plummeted across the board, the pandemic has had disparate effects: It dealt a blow to retail, office and hospitality sectors while industrial and multi-family sectors have remained relatively unscathed.
  • Even within the commercial real estate category, there has been dispersion among subsectors: Industrial has outperformed while office, hospitality and retail have yet to bounce back. This has created unique and potentially fruitful investment opportunities.
  • Our research seeks to assess valuations for a range of commercial property types. To do so, we devised a cyclically adjusted capitalization rate that serves as a real measure of relative value across asset classes and property types. According to this metric, commercial real estate appears to have a significantly higher risk premium than other, traditional asset classes.
  • Based on historical data, secular trends and technical and fundamental factors, we believe commercial real estate is an attractive asset class. We favor industrial, multi-family and hospitality sectors, yet remain cautious on retail. We have a mixed outlook for office properties.

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The Author

Jamil Baz

Head of Client Solutions and Analytics

Josh Davis

Global Head of Client Analytics

Lloyd Han

Quantitative Research Analyst

German Ramirez

Quantitative Research Analyst

Christian Stracke

Global Head of Credit Research

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CMR2021-0923-1849119

Commercial Real Estate: The Office Market in a Post-COVID World
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