Commercial real estate in the US is nowhere near bubble territory in the near-term, but investors would be well-served to consider the three- to five-year supply and demand outlook before snapping up assets.

That’s according to John Chang, Senior Vice President and Director of Research Services at Marcus & Millichap.

Consider industrial, an asset class that’s up 22.3% over pre-pandemic levels, with revenues up by 11% and vacancies at a low near 4%. Despite that gap, “investors are purchasing these properties based on rising demand driven by e-commerce and supply chain disruptions,” Chang says. “But even though industrial absorption is at a record level, so is construction, and new development could ultimately bypass demand.”

It’s a similar story for multifamily.

“There’s a lot of speculation that apartment pricing is overheated,” Chang says. “We’re seeing cap rates hit record lows and record high prices in many markets, mostly high population growth areas.”

The average price per unit for apartments nationally is up 11.9% over end of 2019 levels, according to M&M data, but revenues are up by 12.6% and vacancies are at a record low of 2.8%. Because of that, there’s “no bubble here,” according to Chang.

“The current pricing is substantiated by revenue growth, at least at a national level. In addition, there are numerous signs we are in a severe housing shortage that will fuel demand for apartments,” he says.

Self-storage is comparable: prices are up by 15.5% and revenues are up by 17.2%, while vacancy is at a record low.  Supply side risk is limited for the next few years, but the big question is whether demand will hold.  Chang acknowledges that’s “a bit of an open debate,” but says that since millennials are driving 39% of the self-storage demand and many of them are unable to enter the homebuying market, those self-storage needs are sustainable. Chang has bigger concerns, he says, about the supply and demand outlook for the sector over the next three to five years because the pace of construction will reignite.

Retail isn’t anywhere near bubble territory, with prices up just 1.9% over pre-pandemic levels, and revenues are up by 2.2%.  The asset class “actually looks like a bit of a bargain right now,” Chang says, “especially with retail centers making a recovery.”

Same goes for urban office, where prices are down 2.5% and revenues are down by 9.6% over pre-pandemic levels. Suburban office is a little more aggressive, with prices up by 11.5% and revenues down by 1%. Significant migration to the suburbs from millennials could also drive future demand, making suburban office a “reasonable bet.” Return to office plans will be key to the outlook for the sector, Chang says.