Expert: 'The underlying fundamentals of real estate are quite strong'
● The real estate industry was ranked as the S&P 500's third worst-performing sector in 2022.
According to Todd Henderson, Co-Head of Global Real Estate DWS Group, the market broadly, from rentals to home buyers, is doing well - with one exception: commercial office buildings.
Rental vacancies finished last year at 5.3%, the lowest vacancy rate on record since 1988, according to Henderson.
The rental industry saw 7.5% income growth in 2022, the highest historically except for during the recovery from COVID.
Henderson also noted another positive development — an increase in millennial homeownership, which he said has and will continue to bolster housing market activity.
“I think that that will continue, but housing prices are a bit challenged as a result of the cost associated with owning homes, in particular, the cost of mortgage financing,” Henderson said.
Henderson also noted that the market has seen a precipitous increase in cash buyers. Americans bought one of every three single-family home and condos with cash in 2022, according to data analytics firm Attom.
Going forward, Henderson offers a mixed prognosis. For instance, he is particularly bullish on neighborhood shopping centers, which have reached their lowest vacancy levels since 2007.
"You see a lot of service oriented retail in neighborhood shopping centers, which is very difficult to dis-intermediate through e-commerce," Henderson said.
Conversely, he’s pessimistic about office real estate, which saw a national vacancy rate of 16.5% in January, up 80 basis points from January 2022.