Commercial real estate today: A four-sector outlook

NOW that individual investors can access direct real estate investments, what should they keep in mind regarding the main US commercial real estate (CRE) sectors and their respective outlooks? We analyse the prevailing perspectives on the US CRE market and four of its key segments, specifically residential (multi-family), industrial, retail and office.

Residential – multi-family 

The US faces a significant housing unit shortfall. Pre-Covid, Fannie Mae data estimated a shortage of 3.8 million homes. New estimates range from two million to three million. While construction starts rose through most of 2021, according to Green Street analysis, the estimated influx of 1.3 million net units after subtracting obsolete properties will not be enough to accommodate the projected 4.7 million household formations.

Real wages have increased across the wealth spectrum, but suitable, affordable housing that costs less than 30 per cent of household income is still out of reach for much of the US population, particularly in leading primary markets. At 63.1 per cent, the US homeownership rate is at a record 53-year low as millennials, who are of prime age to start families and purchase homes, face far steeper costs than prior generations.