In a recent survey conducted by CBRE, the outlook for U.S. commercial real estate cap rates has shown a notable shift. The survey, which polled capital markets and valuations professionals across the country between November and December 2024, revealed a decrease in respondents expecting cap rates to rise compared to previous surveys. Instead, the most common response across all property types was that cap rates would remain unchanged.
One of the most significant trends observed in the survey was the evolving perception of the office sector. While office properties still have the highest proportion of respondents anticipating further valuation declines, this number has dropped substantially over the past two years. This suggests a gradual improvement in the outlook for offices, particularly for prime properties located in gateway central cities. These areas are experiencing a brighter outlook, likely due to their strategic locations and demand for high-quality spaces.
However, the picture is less optimistic for suburban office markets. Here, investors continue to demand a risk premium due to weak market fundamentals and a scarcity of prime office spaces. This dichotomy in the office market—where central city properties are thriving while suburban areas struggle—is expected to persist. This bifurcation highlights the complexities of the current real estate landscape, where location and property quality play crucial roles in determining investment attractiveness and potential for growth.