NEW YORK–Commercial real estate prices are projected to fall as much as 5% in the next 12 months amid tightened regulations, a wall of debt maturities and property sales by publicly traded landlords, according to a new report by Pacific Investment Management Co. (PIMCO).
According to the report, by PIMCO portfolio managers John Murray and Anthony Clark titled “U.S. Real Estate: A Storm Is Brewing,” the global surge in demand for U.S. property investments that pushed real estate values to records may wane as slowing growth in China, lower oil prices and dislocated debt markets threaten to halt six years of price growth.
The PIMCO reports suggests there may be opportunities in a real estate shakeout, allowing some buyers to snap up properties at bargain prices. Additionally, a wave of maturing debt from the last decade’s boom starts coming due this year, opening a window for investors to fund borrowers who come up short, according to the report.
Signs of a cooling real estate market have emerged across the country since the start of the year. Commercial property values in big U.S. cities, which have seen the largest increases during the recent boom, have declined 3% in the past three months, Moody’s Investors Service and Real Capital Analytics Inc. said in a June 6 report.