NEW YORK — Following a turbulent year in 2016, the U.S. economy and property markets are positioned to perform well in 2017, according to Cushman & Wakefield’s U.S. Macro Forecast.
Although it will take time for policy to form, Cushman & Wakefield expects that President Trump, alongside a Republican-controlled House and Senate, will deliver fiscal stimulus measures that will further boost the U.S. economy and property markets. That said, some of the expected growth in fiscal policy will be negated by tighter monetary policy, higher interest rates, higher inflation and more global volatility, according to Kevin Thorpe, global chief economist at Cushman & Wakefield notes that.
Cushman & Wakefield forecasts the U.S. real GDP will grow by an upwardly revised 2.3 percent in 2017, and will hit 3 percent in 2018.
The forecast predicts the following implications for the commercial real estate sector:
- Office: With 730,000 estimated new office-using jobs in 2016 and an additional 438,000 and 508,000 expected throughout 2017 and 2018, respectively, there is still runway for the office market. In 2016, total net absorption is forecast to end the year at 50.2 million square feet. Absorption is projected to increase to 54.9 million square feet in 2017. Vacancy will remain stable through 2017 and will begin rising in 2018.
- Industrial: The upbeat near-term outlook for consumer spending will ultimately trickle into robust demand for warehouse and distribution space, especially as e-commerce sales as a share of total retail sales continues to rise. Additionally, with year-over-year growth in manufacturing production set to rebound to positive territory, and with auto sales expected to remain in the 17-18 million units-per-year range for the next two years, the outlook for the overall industrial sector remains bright.
- Retail: Although growth in consumer spending will remain strong, a larger share of that spending is going to e-commerce. Several major retail categories will be in contraction mode, while other sectors that have been in growth mode will face issues of market saturation that will slow expansion. Neighborhood/community and power centers will be least impacted by contraction, while mall and lifestyle centers — especially Class B and C properties in secondary or tertiary markets — will be disproportionately affected.
- Transaction Volume: Cushman & Wakefield expects year-end reports will show investment sales declined 15 percent to $466 billion in 2016 vs. 2015. This is still well above the average of $279.7 billion over the 15 years for which there is consistent transaction data. While investment sales volume is forecast to modestly decline over the next two years (-2.2 percent in 2017 and -8 percent in 2018), the firm still anticipates solid activity with yearly totals registering $455.7 billion and $422 billion, respectively. By and large, the outlook for the U.S. economy over the next few years remains positive.
“Although headwinds have come and gone and come again, the major force driving growth — the consumer — is still gaining momentum,” Thorpe says. “Of course, we are ushering in a new era of fiscal and monetary policy, and that will continue to generate uncertainty. However, we believe there will be a net positive impact on economic growth as well as the property markets in 2017 and 2018.”