U.S. Viewpoint - Investment Momentum and the Office Market September 2017
CBRE Research confirms that the momentum effect—widely studied in the financial markets—is present in metropolitan office markets.
Over a 20-year period, strong momentum metropolitan areas—those markets with the highest total return over the previous year—consistently outperformed slower momentum markets, on average, over one-, three- and five-year holding periods.
Despite a higher variance in the returns among strong momentum markets, their return per unit of risk—or Sharpe ratio—is higher.
Houston, Oklahoma City and Nashville were most often in the strong momentum group over the 20-year period studied.
CBRE Research’s analysis shows that the momentum effect is an important factor in explaining office returns. It may be utilized to guide asset-allocation and market-selection decisions at a high level.