Rest Assured: US CRE Is Strong And Will Continue Its Upward Trajectory Well Into 2017
Though America's financial markets faced some tumultuous times this year—particularly stemming from volatility overseas—the economy has weathered the shocks with resilience, according to the latest Cushman & Wakefield US Macro Forecast. The country’s economic position not only remains strong, but continues to support commercial real estate.
Cushman & Wakefield principal economist Ken McCarthy (pictured below) chatted with Bisnow regarding several factors driving demand in property markets, as well as forecasts going into 2017. Here are some key insights.
Businesses Are Nervous
“I think the US economy certainly hit some headwinds in the first half of the year. We had volatility in financial markets in the first quarter driven by uncertainty in China, then as that settled we hit uncertainty in Europe. Businesses became a little more cautious in terms of their willingness to spend until they had clarity.”
Economic Growth Remains Strong Thanks To Job Growth, Consumer Confidence
“The key to the growth in the economy so far this year has been consumer spending. We’re finally starting to see healthy increases in median household wages, and that’s reflecting in consumer spending. Retail sales and auto sales have been healthy.
Jobs growth remains healthy (and) relative to the rest of the world, the US remains in good shape. We think GDP growth will reach 2.1% in 2017, as consumers continue to increase spending and businesses increase investment.”
US Property Demand Remains High, Particularly For Foreign Investors
“What we’ve seen has been significant demand for CRE in the US over the past several years as the economy has improved. I think there is no question that foreign investment in US property has been an important factor in the market, particularly in the last couple of years.
This year we’ve seen increased interest from Europe and Asia, partly driven by the fact that several European countries have negative interest and investors are looking to get returns elsewhere.
The challenge is finding stuff to buy, as sellers have been more reluctant to put their properties on the market."
Job Gains Are Boosting Office Market
“It’s really kind of simple— employment growth is driving demand in office and continues to do so. The other thing is for most markets there is not a lot of supply coming online. We haven’t seen a lot of spec construction, so it’s performing well— very strong with high rents.”
There Will Be No Stopping Industrial Markets
“Industrial is off the charts strong. The absorption of industrial space set a record last year. Demand has been extraordinary, largely driven by e-commerce, and the desire by e-commerce costumers to be able to distribute product as quickly as possible has caused a huge upswing.”