U.S. Macro Forecast: Still Plenty of Runway for CRE
Positive Momentum for Office, Industrial, Retail and Multifamily
WASHINGTON, June 12, 2015 /PRNewswire/ -- DTZ, a global leader in commercial real estate services, announced today the release of its U.S. Macro Forecast, which predicts positive economic results for the second half of 2015 after a shaky start.
A weakened global economy, a plunge in energy investment, a soaring U.S. dollar and another difficult winter in many U.S. regions took their toll on growth, but real gross domestic product (GDP) still managed to grow 2.7% year-over-year as of the first quarter, a rate that is high enough to sustain commercial real estate demand drivers. Also, job growth is at its highest point in 15 years, and 30% of the new jobs created to date in 2015 were in office-using sectors, with the bulk in professional and technical services. Though the current growth cycle has its inconsistencies, it could surpass the 10-year cycle that spanned from 1990 to 2000, which marks the longest expansion post World War II.
"It is always difficult to predict with any precision when an expansion will come to an end, but the latest data on confidence, jobs, debt ratios and capital flows shows there is little evidence to suggest the U.S. expansion can't on go for a lot longer," said Kevin Thorpe, DTZ Chief Economist, Americas. "From a commercial real estate perspective, the odds are heavily in favor that expansion has a lot of runway left."
For the U.S. commercial real estate sector, the mid-year U.S. Macro Forecast predicts:
- Apartment vacancy is expected to tick up to approximately 5% by 2016, from 4.2% today, with delivery of an additional 200,000 new units by the end of next year. With the multifamily sector's favorable demographics, though, rents will continue to increase but at a decelerating rate.
- E-commerce and a resurgent auto sector are two primary factors driving a robust industrial sector. DTZ forecasts a record-setting 179 million square feet of net absorption in 2015, with vacancy falling to 7.1%.
- The U.S. office sector is forecast to post net absorption of approximately 80 million square feet in 2015, largely driven by office-using job growth. Year-over-year rental rate growth was 2.3% in the first quarter, and rent growth should continue to accelerate in most markets through the end of year, as Class B space (in central business districts) closes a rent-growth gap that has developed over the course of the economic recovery.
- In the retail sector, Class A properties continue to outperform other segments by a wide margin. Demand for new Class A space is soaring, and developers are responding.
"Demand for commercial real estate is strong and, in some sectors, setting new records," Mr. Thorpe said. "Despite some quirks to start the year, the fundamental drivers for U.S. commercial real estate markets remain solid. While we watch economic developments closely, we also note that it takes significant time for most economic movements to filter through CRE markets, and the most important CRE drivers are doing just fine."
Access this link to download the full U.S. Macro Forecast.
About DTZ
DTZ is a global leader in commercial real estate services providing occupiers, tenants and investors around the world with a full spectrum of property solutions. The company's core capabilities include agency leasing, tenant representation, corporate and global occupier services, property management, facilities management, facility services, capital markets, investment and asset management, valuation, research, consulting, and project and development management. DTZ provides property management for 1.9 billion square feet, or 171 million square meters, and facilities management for 1.3 billion square feet, or 124 million square meters. The company completed $63 billion in transaction volume globally in 2014 on behalf of institutional, corporate, government and private clients. Headquartered in Chicago, DTZ has more than 28,000 employees who operate across more than 260 offices in 50 countries and represent the company's culture of excellence, client advocacy, integrity and collaboration.
DTZ announced an agreement to merge with Cushman & Wakefield in a May 11 press release. The new company, which will operate under the Cushman & Wakefield brand, will have revenues over $5.5 billion, over 43,000 employees and will manage more than 4 billion square feet globally on behalf of institutional, corporate and private clients. The agreement is subject to customary closing conditions and is expected to close before the end of 2015. For further information, visit: www.dtz.com or follow us on Twitter @DTZ.
SOURCE DTZ
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