Global commercial real estate services firm Cushman & Wakefield released its latest U.S. Macro Forecast, confirming that the economy weathered rough headwinds in the first half of 2016.
The key demand drivers that support property markets—consumer confidence, job growth, low interest rates and consumer spending—all remain firmly intact.
Cushman & Wakefield’s forecast continues to anticipate a moderate growth path for the U.S. economy – 1.6 percent in 2016 and 2.1 percent in 2017.
The Cushman & Wakefield forecast predicts the following implications for the commercial real estate sector:
- Office: Office using job growth will continue to slow as a function of a tightening labor market, leading to a gradual decline in office space demand. Net absorption will total just over 60 million square feet in 2016, down from 81.1MSF in 2015.
- Vacancy Rate: will average 13.2 percent for the year, 60 basis points below its 2015 value. Rent growth will achieve its highest rate in the cycle in 2016, growing at 5.5 percent. With the level of new construction expected to increase over the next two years and more supply coming online, rent growth is expected to decelerate in 2017 to a rate of 4.8 percent.
- Industrial: Warehouse and distribution space will continue to benefit from empowered consumers and the continued growth of eCommerce. At the same time, flex/R&D space will benefit from solid gains in high-tech employment sectors.
- Retail: Class A projects will continue to garner the highest levels of demand, lowest levels of vacancy and positive rental-rate growth. Over the next two years, a combined 65.3MSF of net absorption will put downward pressure on vacancy, which is forecast to decline from 8.0 percent in 2015 to 7.3 percent in 2017. Although rent growth will remain bifurcated and a stronger-than-anticipated closure season continues to dampen its outlook, rents are still expected to increase by 4.6 percent in 2016.
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