Green Street Advisors believes real estate values have already reached its peak and are in the ninth inning. In fact, Green Street is forecasting a 5% decline in values in 2016. Green Street bases its call on the narrowing spread between non investment grade corporate bond yields and cap rates. The spread is historically low and signals a decline in property values. Along with this signal, REITS currently sell at a discount versus a premium to net asset value–a second historical signal of a correction. However, Green Street Advisors still sees operating fundamentals as strong with further potential rent growth and stable occupancies. You can read more below.
Commercial real estate investors are receiving ominous signals from the bond market:
Source: Credit-Market Swoon Sends Somber Message to Property Investors – Bloomberg Business