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Though pricing fluctuations still prevail across commercial’s subsectors, a new report from Cushman & Wakefield shows that sentiments are shifting.
Recent data from the commercial real estate giant shows that collective investment volumes across markets in Q2 of 2024 totalled $10.1 billion, more than double the $4.9 billion transacted in Q1.
According to the firm’s experts, this indicates that commercial real estate investment volumes are on a positive trajectory despite recent fluctuations.
While values are expected to continue on a downward trajectory for the short term, the firm believes that the end is in sight. Cushman & Wakefield’s Commercial Property Price Index (CPPI) tracks values across sectors, and forecasts that valuations will officially bottom in Q1 of 2025, with an 8 per cent peak to trough. Much of this will be driven by offices, with a repricing of 25 per cent.
Professionals across the sector are reporting that sentiments are shifting, with investor appetite slowly picking back up.
According to Cushman & Wakefield’s research, CRE professionals are feeling more positive, with the number of professionals who believe the market is in a downturn declining from a high of 75 per cent in Q4 2022 to 45 per cent in Q2 2024.
At the same time, 43 per cent of CRE insiders said they felt the market had reached its bottom.
Based on the firm’s forecasts, aggregate volumes are on a path to continue rebounding throughout 2025 to reach $47 billion at the close of the year – clarity on interest rates is expected to be a major driver of this move.
Capitalisation rates are therefore to stabilise throughout 2025 before compressing in 2026.
Cushman & Wakefield’s national economics and forecasting manager, Sean Ellison, said that retail would be the first indicator that a rebound is in progress, with the sector leading the charge across the commercial sector.
“The value of retail assets has already found its stabilisation point and is poised to rebound, and we expect industrial and office markets to follow,” he said.
Cushman & Wakefield projects a 16 per cent upward repricing in retail from Q4 2024 through to 2030. Retail investment volumes in Q2 totalled $1.4 billion, which is expected to grow to $2.9 billion quarterly by the end of 2025.
Logistics and industrial come in close second for future projections. Across this sector, cap rate expansion has had minimal impact amid stronger rents and lower vacancies, with a forecast price increase of 19 per cent from Q1 2025 to 2030. Investment volumes are expected to grow from $2.6 billion in Q2 – up from less than $900 million the previous quarter – to $3 billion by late 2025.
A substantial rebound for the office sector is expected to buoy sentiments, with Cushman & Wakefield expecting a value uplift of 28 per cent from Q1 2025 to 2030, even if the sector doesn’t quite reach the peak of Q2 of 2022. Office investment volumes rose more than $2 billion quarter-on-quarter in Q2 to $3.5 billion, and are predicted to rise to $4 billion by the end of 2025.
ABOUT THE AUTHOR
Juliet Helmke
Based in Sydney, Juliet Helmke has a broad range of reporting and editorial experience across the areas of business, technology, entertainment and the arts. She was formerly Senior Editor at The New York Observer.
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