UBS Asset Management outlines its 2020 US real estate outlook, focusing on a late-cycle environment marked by slowing growth, modest income gains, and rising uncertainty across property sectors. The base case implies 5.8% total returns, though small shifts in cap rates or growth expectations could materially alter outcomes. The paper challenges whether stability in sectors like office and retail can offset broader cyclical pressures.
Real Estate Outlook: US – Annual Outlook 2020
UBS
Tiffany B. Gherlone
Research
28 Pages
Key Takeaways
Moderate Return Outlook: Base case total returns are projected at 5.8%, down from 6.6% in 2019, driven by slower appreciation and a 10 bps cap rate increase.
Scenario Dispersion Widens: Downside returns could fall to 0.7% versus 10.0% upside, reflecting GDP outcomes ranging from 0.4% to 3.4%.
Income Growth Slows: Net operating income growth is expected at 3.3% in the base case, compared to 4.4% in 2019, signaling late-cycle deceleration.
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