Tighter regulations, a volatile debt market and low oil prices are signaling choppy waters ahead for the U.S. commercial real estate market, according to a new report by Pacific Investment Management Co.
The confluence of factors “is creating a blast of volatility for U.S. commercial real estate,” PIMCO’s report stated, according to Bloomberg News. In the report, “U.S. Real Estate: A Storm Is Brewing,” the Newport Beach, Calif.-based investment manager projected prices would slide as much as 5 percent over the next 12 months.
Prices are already dropping in New York and nationwide. Over the past three months, U.S. property values slipped 3 percent. Real estate deals in New York are projected to drop by up to 30 percent in 2016, according to Cushman & Wakefield.
In part, price growth has been stymied by high borrowing costs on commercial mortgage-backed securities. But real estate investment trusts have also staggered, and some are becoming sellers, while foreign investors are in limbo.