CBRE: Asset Prices will Drop 10-20 Percent by Year End

Investment property values are expected to decline 10% to 20% by year’s end, causing a moderate rise in cap rates, according to a new report by CBRE.

The report does indicate that the investment property market has hit bottom and is already in recovery mode on hopes of a COVID-19 vaccine and a possible return to normalcy.

The global real estate firm estimates, however, that it will take three years for prices to rebound to pre-pandemic levels.

Signed confidentiality agreements in Q2 2020 for industrial and multifamily property offerings reached 46% and 42% respectively. Signed confidentiality agreements for retail and hotel assets were in the upper-30s and mid-30s percent range, respectively, of the past two years’ average second-quarter level.

At the lower end of the spectrum, the office sector’s signed confidentiality agreements reached the low-30s percent range, due to a weak rental outlook due to pandemic-related health concerns and the spike of working from home (WFH) arrangements. However, operational office assets—including life sciences facilities, data centers and single-tenant buildings—increased in popularity given that these properties provide income stability and are less prone to economic disruptions.