Commercial real estate services firm Cushman & Wakefield’s macro economic report predicts another solid year in the U.S. Economy.
Moderate growth of about 2.4 percent GDP is expected in 2016. That level of GDP growth, along with the anticipated job growth, are in line with the strong demand for office and industrial space the country saw last year.
That prediction is made in the face of worries about stock market performance early in the year. The markets have been hampered — S&P 500 and Dow Jones are down nearly 9 percent in late January compared to last year — by concerns about oil prices and China’s economy, according to Cushman & Wakefield.
“Economic turbulence at the start of a new year is nothing new,” Kevin Thorpe, Cushman & Wakefield’s chief economist said in a news release. “We have seen it come and go for the past several years without any long-lasting damage to the health of the broader economy. Typically, the volatility drives capital flows back to United States with a refocus in core assets, and that is happening again.”
That prediction is in line with what local economist Anirban Basu, CEO of Sage Policy Group, told The Daily Record earlier this year.
At that time Basu said he expected consumer spending to buoy the economy through the end of the year.
But he said a recession in 2017 or 2018 wouldn’t be surprising. Basu noted that the economy has been growing for about five years, which in recent history is when the economy begins to retract.
“I’d rather predict a recession that doesn’t happen than not predict a recession that does happen,” Basu said.
Here is the Cushman & Wakefield’s predictions for the commercial real estate sector this year:
The office sector is forecast to post net absorption in the range of 75 to 85 million square feet annually over the next two years. Although demand will ease towards the end of the forecast period, new development will continue to lag. As a result, vacancy rates will decline from 14.2 percent in 2015 to 13 percent in 2017, and office rent growth will continue to accelerate, rising to 4.5 percent in 2017.
The Industrial sector will face a mix of headwinds and tailwinds, but the overall outlook remains generally upbeat. The headwinds arise from declines in manufacturing activity related to a stronger U.S. dollar and weaker global demand. But these drags will be more than offset by a confident, higher spending consumer, which will boost demand for space related to ecommerce, auto, technology, housing, along with other consumer-related sectors. Although demand levels are expected to cool off, Cushman & Wakefield forecasts overall vacancy will be on par with the tightest conditions ever observed in the sector, falling to 7 percent in 2016.
In the retail sector, demand will remain focused on Class A product as well as new space. Vacancy will decline to 7% in 2016, and rental growth will average 2 percent to 3 percent between 2016 and 2017.