Strategies (4)
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Strategies
Industrial
Industrial remains a favored sector with demand driven by the broadening adoption of e-commerce, obsolescence of existing industrial stock, and nearshoring/onshoring trends. The convenience and choice of online shopping is evidenced by the 96% increase in e-commerce sales from 2019 to 2023 versus a 34% increase in total retail sales during the same period.
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Strategies
Residential
CHC continues to see opportunity within the multifamily space due to a shortage in affordable housing and elevated home mortgage rates. The sector has faced recent headwinds in part due to increased deliveries. Compared to the 20-year average of 504,000 units under construction, 2023 represented a peak year for deliveries with 590,000 units and 2024 deliveries are estimated at 575,000. However, due to high construction and financing costs, new starts activity has declined and only 346,000 units are expected to be delivered in 2025. Furthermore, the disparity between homeownership and rental costs has reached $1,114, representing a 26.7% year-over-year increase and another demand driver for the sector.
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Strategies
Retail
The retail sector has demonstrated accelerated rent growth and tightened vacancy rates across most US markets in recent years. Retail seems to be the overlooked sector, particularly in the Sunbelt. After mild negative tenant demand of -28m sqft in 2020 driven by COVID-19, tenant demand rebounded with an average of 67m additional square feet leased in each of the last three years. Furthermore, retail development has been limited in the last several years due to the impacts of COVID-19. With consumers back in stores, occupancy rates are above average, and rents are increasing by 3% to 4%. Given the growth in market rents, in-place rents are currently 10% to 15% below market rents indicating strong potential for NOI growth as landlords recapture space.
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Strategies
Other
The self-storage sector is believed resilient to inflation and has countercyclical renter-demand factors, driven by relocation, ongoing population growth, and homeownership hurdles. The latest supply wave, which occurred in 2016-19, expanded the existing storage stock by 18% cumulatively. This supply has since been absorbed and new development activity over the next 12 months remains subdued. As a result, supply forecasts for 2027 and 2028 have been reduced by 120bps and 50bps, respectively.
