U.S. Real Estate Sector Fall 2023 Report: Four Quadrant Perspectives


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Sector conditions and outlook

Key

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Improving Neutral Deteriorating Positive Moderately positive Neutral Moderately negative Negative

Current condition

Outlook

APARTMENT

The apartment sector is starting to

Current condition

Outlook

SINGLE- FAMILY RENTAL

The single-family rental sector is one of a few that are experiencing an improvement in fundamentals as demand remains healthy and rent growth is in the mid-single digits. Pressures from the supply side of the market remain a concern, but the lack of financing available for new development will curb new supply over the next 12 months.

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DATA CENTERS

The data center sector remains tight, with demand continuing to increase through the first half of 2023. Occupancy remains in the high 90% range and rental growth trends remain healthy as space is in short supply, which continues to be a potential headwind for the sector. Although capital markets remain a persistent headwind, this is one of the few sectors that is contnuing to see an increase in demand for space despite economic uncertainty.

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STUDENT HOUSING

Tenant demand is robust and leasing for the 2023-2024 school year outperformed expectations for both occupancy and rental rates. Tenant demand and rent increases may now be positioned to outperform traditional apartments over the near-term horizon.

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LIFE SCIENCES

Life sciences has seen both capital market and space market fundamentals pull back in 2023. Venture capital funding, a key source of growth for life science companies, has become much scarcer during the year. As a result, tenant demand has moderated considerably for lab space.

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Source: Principal Real Estate, September 2023



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