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CBRE Expects Steady Decline, But No Recession Until 2024

Many economic pundits predict next year may be the start of the next recession. One prominent economist even sees the U.S. already entering the throes of one.

But an executive with CBRE — the world's largest commercial real estate brokerage firm — said Wednesday the national gross domestic product will remain above any recessionary levels at least until 2024.

CBRE Vice Chairman John Shlesinger

“What we're looking at is over 2% GDP this year, but it's slowly sliding,” John Shlesinger, CBRE's vice chairman of advisory and transaction services, said during Bisnow's Atlanta State of the Market event. “The economy is moderately slowing down, but a ton of money's on the sidelines still.”

The change in forecasting came just this week after CBRE Divisional Research Director Dan Wagner revised his outlook from a 2021 recession based mainly on the growing dovish view of the Federal Reserve toward interest rates.

After increasing rates in December, there was an expectation that the Fed would raise rates three times this year. That has yet to happen, and there is now growing talk of an actual rate cut as signs of a global economic slowdown increase.

“The talk of future interest rate increases have basically disappeared,” Federal Reserve Bank of Atlanta Director of Real Estate Analytics Carl Hudson said during his keynote appearance at Bisnow's event. “Clearly the expectation is that interest rates are going to be at worst flat, and a likelihood of a decrease.”

Wagner said CBRE predicts U.S. GDP will hit 2.3% this year. But it will slow in subsequent years, from between 1.5% to 2% through 2023. A rate cut will likely keep the overall interest rate environment low, which will just continue to expand the growth the economy has been experiencing since the end of the Great Recession, Wagner said.

“But growth may not feel great,” he said in an interview with Bisnow at the event.

Federal Reserve Bank of Atlanta's Director of Real Estate Analytics Carl Hudson

There are still plenty of headwinds to the economy that could prompt a recession sooner rather than later.

“We have an asterisk that says Chinese tariffs,” Shlesinger said. "And whatever happens, [that] is going to change everyone globally in terms of economic forecasts."

Hudson said the Fed is closely watching money businesses are spending on fixed assets, such as new equipment or raw materials. The expectation this year appears to be 5.7% growth in that category, which is historically on the low side and down from last year's 6% gain, according to a recent Kiplinger article.

“My main concern is the business fixed investment remains soft,” Hudson said.

Georgia Tech Executive Director of Real Estate Tony Zivalich, Cooper Carry partner Bill Halter, North American Properties Managing Partner Mark Toro, Selig Enterprises Executive Vice President Chris Ahrenkiel, Transwestern Executive Managing Director Clark Dean and The Graham Group Managing Director Jeffrey Graham

Other panelists raised concerns about an aging workforce, the potential for wage growth to spike, prompting inflation, and the persistence of rising construction costs.

Selig Enterprises Executive Vice President Chris Ahrenkiel said Atlanta office developers could see construction costs at $920/SF by 2030 from the current $540/SF today, if the current, historic Atlanta rate of 5% annual cost increases persists.

North American Properties Managing Partner Mark Toro said Atlanta's notorious congestion is his biggest concern for the future of the metro area's economic vitality. Toro was recently named as a board member to the new regional transit agency, the Atlanta-Region Transit Link Authority. 

“The thing that keeps me up at night, for the most part, is we are running the risk of killing the Golden Goose,” Toro said. “We still think we can pave our way to success and widen our roads, and we're running out of room.”

CORRECTION, July 8, 3:20 P.M. ET: A previous version of the story overestimated Chris Ahrenkiel's future construction costs. The story has been updated.