IS A BUBBLE FORMING IN COMMERCIAL REAL ESTATE?

• The big question on many investors’ minds – “Is a bubble forming in CRE?”

• From a macro level, Retail, Urban Office and Suburban Office are clearly not in a bubble

  • - Price growth has been moderate, and fundamentals have kept pace with price gains

• While Apartment values have climbed considerably, historically strong vacancy and rent growth support strong appreciation – Structural housing shortage also a strong tailwind

• Similarly, Self-Storage price gains are backed up by record property performance

  • - Vacancy at all-time low and rent growth is strong

  • - COVID helped quell overdevelopment risk, keeping supply and demand in balance over the short-term

• Even Industrial, where exuberance has been strongest, is likely not in bubble territory

  • - Vacancy, rent growth and NOIs support the aggressive price appreciation

  • - eCommerce and supply chain disruptions provide long-term tailwinds to the industry

• Investors should closely monitor the supply and demand outlook for the next 3 to 5 years