Urban Core Recovery To Gain Momentum
- Slow, but incremental recovery of the urban core; will vary by city’s regulations and pace of return to office
- Driven by benefits of in-person interactions, return to office will play key role in urban revival
- Downtown real estate, particularly Office, would benefit
Housing Construction Will Remain Short of Demand
- Rising construction costs, ongoing labor shortage, and strong housing demand to prolong housing shortage
- Construction likely concentrated at upper price points and in suburbs, benefiting suburban real estate
- Higher home prices set to boost Apartment demand
Inflation Likely to Remain Elevated – Fed Walking Tightrope
- Supply chain disruptions, wage pressure from tight labor market and housing shortages will sustain high inflation
- Will place more pressure on Fed to further accelerate retreat from bond-buying program and raise interest rates
- With cap rates expected to fall, the yield spread between interest and cap rates is likely to tighten
*Through November; Core PCE through October; 10-Year Treasury through December 15
Sources: Marcus & Millichap Research Services, Federal Reserve, BEA, BLS