The balance between supply and demand for retail property has improved to the point where the sector's outlook is more cautious than bad, a report on commercial mortgage-backed securities published by Moody & # 39; s Investors Service showed on Sunday.
The retail composite value rose from 32 in Q3 2020 to 35 in Q4 2020, moving it from the “red” zone to the “yellow” category. although the composite value for commercial property fell from 46 to 45 due to ongoing concerns about the hotel and office market. (Scores up to 33 are red, 34-66 are yellow, and 67-100 are green.)
Moody's analysis of the data from CBRE Econometric Advisors is in line with other reports showing that retail mortgage arrears are gradually improving, but also suggests that the over-supply in other sectors may continue for a while.
Hotels achieved a score of zero in the past two quarters. Conditions in the markets for central business districts and suburban offices have deteriorated from 55 to 41 and from 49 to 39, respectively, in the last period analyzed by Moody & # 39; s.
In Moody's latest report, only a small fraction of the local markets were put on "supply-demand monitoring". In these areas, supply may exceed demand by 5% or more over the course of the next year.
Retail markets in this category include Cleveland, 6.1%; Indianapolis, 5.4%; Detroit, 5.3%; and Los Angeles 5.1%. In this category there is a central business district office market, San Antonio, at 8%. There is also only one suburban office market for supply and demand: New York at 5.6%. Two hotel markets are in focus: Jacksonville, Florida, 11.5% and Austin, 9.1%.