Torto Wheaton Research senior economist Petros Sivitanides says in a research paper that US cap rates should rise moderately for all property types except hotels if interest rates rise slowly & stay below their 20-year average.
In the analysis on the Torto Wheaton Research website, the inverse of cap rates – the price:earnings ratio â€“ is forecast for 2006, using the end of 2003 as the base.
“We expect p:e ratios for all sectors, except full-service hotels, to decrease by 2006. The greatest decline is predicted to occur in the office and multi-housing sectors.”
Assuming constant earnings, Torto Wheaton Research expects declining p:e ratios to contribute to a fall in values of about 7.5% in the office sector, 6.5% in the multi-housing sector, 4.8% in industrial, minimal change in retail.
In the hotel sector, it expects a strong recovery to push p:e ratios up & contribute to a 5% increase in values.
The research doesn’t forecast total change, which would also depend on moves in net operating income & local conditions.
Website: Torto Wheaton Research