First-quarter surveillance of U.S. commercial mortgage-backed securities and commercial real estate collateralized debt obligations suggest slow growth for CRE property markets this year.
Moody’s managing director Michael Gerdes said in a report Wednesday that there will likely also be an accompanying slow rise in real estate values, investment and lending, as well as stability in the performance of “core property types.”
He said core property types, except retail, experienced rental growth in the fourth quarter of last year. Gerdes expects even the retail could improve if the economy does, although he said it is facing a “bumpy road” despite signs of improvement.
The report characterized employment indicators as “positive but slow” which means recovery could take some time in the office sector where the vacancy rate is still 16%.
Moody’s view of hotels is perhaps the most positive, noting that supply in this sector is stable and demand has been strong for all but midscale properties.
The ratings agency noted that fundamentals in the multifamily sector have improved, leading to a positive outlook for the sector. But Keith Banhazl, vice president and senior credit officer at Moody's, said, “We are wary of new supply coming on in the next 12-24 months that may slow down that growth.
“The growth we're seeing might drop off a little bit,” he said in an interview with this publication. “The impact of new construction will be market specific.”
According to the report, multifamily demand is still rising. Occupancy is at 95% and effective rents are now above pre-recession highs. Completions remain slow but are poised to outpace absorption for the first time since 2009, Moody’s said.
