Commercial Real Estate Continues to Lose Momentum

CRE Chartbook: February 2022

Source: Economics Group of Wells Fargo Bank, N.A.Summary Higher Interest Rates Slow CRE’s Momentum Big Picture

  • Inflation continues to run at an uncomfortably fast pace, despite signs of easing in recent months. Consequently, we expect the Fed will remain in tightening mode over the next few months and keep policy in restrictive territory until inflation is convincingly headed back to its 2% target.
  • The odds of a soft landing are increasing, however we maintain our view that a mild recession beginning in the second half of 2023 is still the most likely outcome.
  • Higher interest rates and heightened economic uncertainty continues to weigh on CRE activity. Broadly speaking, demand has downshifted, while supply continues to expand. Rising vacancy rates have yielded a moderation in rent growth across the board.