Research recap: Q2 2022 Commercial real estate outlook

The commercial real estate market enters Q2 with strong fundamentals, but they may be tested in the months ahead. We break down our CRE outlook.

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April 20, 2022 | 10 minute read

About this episode
Investment Research Director Kara O’Halloran is joined by fellow Director Andrew Korz to talk all things real estate—they catch up on what we’ve faced so far in 2022 and where the market may be heading. The two discuss inflation, cap rates, the Fed rate hike cycle and one of the hottest topics of the past two years: The housing market.

Want to dive deeper? Check out the full CRE outlook on our website: https://fsinvestments.com/fs-insights/q2-2022-commercial-real-estate-outlook/

Transcript excerpt:

Kara O’Halloran (00:05):

Welcome back to FireSide, a podcast from FS Investments. My name’s Kara O’Halloran, and today we are continuing with our Q2 outlook content with an episode focused on commercial real estate. So, I’m excited to have Andrew Korz, another Director on the team here to discuss all things CRE. Andrew, welcome. Thanks for joining.

Andrew Korz (00:23):

Yeah. Happy to be here.

Kara O’Halloran (00:25):

So, commercial real estate, like a lot of other asset classes started 2022 in a pretty strong position. Really good fundamentals, tailwinds from this strong expected economic growth. The market had just come off of a year of exceptional property price growth with record sale volumes. There were definitely headwinds in the form of inflation and the Feds tightening cycle. Some of the things that we’ve talked about at a macro level and the things that apply to other asset classes. But I think what would be helpful is if you just kind of catch us up. What happened in the first quarter? Where does CRE sit now?

Andrew Korz (00:58):

Sure. Yeah. I think when we think at the broadest level, what public markets are focused on right now is of course, as you said, inflation, it’s the war in Ukraine. It’s rising COVID cases in Asia. And there’s a lot of mixed sentiment about the forward sort of outlook for the economy. But right now, sort of sitting here on what is it, April 12, the US economy is really strong right now. And as we know, the commercial real estate market is an economically sensitive one, generally speaking. Rent growth and fundamentals in commercial real estate are really strong. The past few quarters we’ve talked about inflation a lot. We’ve talked about sort of the inflation hedging nature of real estate in previous episodes. And over the past few quarters, we’ve really seen that come to fruition.

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Andrew Korz, CFA

Executive Director, Investment Research

Kara O’Halloran, CFA

Director, Investment Research

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