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Everything is Overpriced...?

Everythin is Overpriced Hero
In addition to Realnet and listings, our friends at Altus provide us with a regular ”sentiment survey” on commercial real estate. It’s a broad sample of viewpoints from hundreds of people at dozens of firms, across investment, appraisal, operations and lending. While it’s full of insights, what jumped out to me is people’s view of current market pricing. Aside from retail, >50% of respondents view all other asset classes as overpriced.

Think about that for a moment: market participants think everything is overpriced! How can deals possibly happen? I can see the argument for hot assets like apartments, that sell on the assumption of huge future rent growth. But land, hotels, even office are overpriced? 

While that’s an extreme conclusion, it makes sense to me, and aligns with a number of trends we saw in 2023:

  • Optimism about rate cuts saving the market in 2024. There’s no need to reduce prices is the buying environment is just about to get better.
  • Minimal participation by institutional buyers. As I’ve mentioned before, institutions are usually 35-40% of the market as buyers, and that’s dwindled to almost nothing.
  • Declining deal volume, which makes benchmarking prices very difficult. 2021 was a record year for investment and the trend has been downward since.
  • Severe lending slowdown due to rising bond yields and borrowing costs. Without lending, few big deals can happen to ”reset” the market.
  • Lack of distress sales to force new pricing into the market.
Everythin is Overpriced Graph

Summary
A wide-ranging survey by Altus found CRE executives and firms view almost all assets as overpriced. 


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Pour plus d’informations, veuillez contacter:

Adam Jacobs

Head of Research | Canada

Toronto Downtown

Colliers Canada's head of research, leading a cross-country team of 20 mapping, analytics and research professionals. Formerly head of Canada research at Cushman Wakefield and Director of Analytics at Oxford Properties. Featured in mainstream publications such as the Toronto Star, industry publications and podcasts. Specializing in the big picture and the fundamentals driving real estate - demographics, the macro environment and the global economy. 

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