• Americas

2017 Outlook: Measured Optimism

By Kevin Thorpe, Chief Economist

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Cushman & Wakefield’s latest MarketBeat reports evaluate U.S. office, industrial, retail, and capital markets

Steady growth in the face of uncertainty was 2016’s phrase that pays, and so shall it be in 2017. To varying degrees, we’re optimistic about the 2017 outlook for U.S. office, industrial and retail property as well as U.S. capital markets, as you’ll see in our latest MarketBeat Reports.


Perhaps the strongest commercial real estate sector, industrial has been on a tear the past few years, and that momentum will carry (or is carrying) over into 2017.

Solid labor markets and firmer wage growth will support consumer confidence and spur stronger consumer spending. Consumption will drive industrial absorption, particularly for warehouse.

Net absorption will once again approach 250 million square feet (MSF) in 2017. Leasing demand will balance new deliveries and hold national vacancy steady. We anticipate that supply will meet demand for industrial space in the latter half of 2017. Even then, expect strong, upward pressure on rents.

Given the expected policy changes (tax cuts, spending increases, deregulation) from the Trump administration, the near-term outlook has been revised upward. However, the medium and long-term outlook is less certain.


Office absorption slowed in 2016 to 52.6 MSF, down 35% from 2015, but still the third-highest yearly total since the expansion began in 2010. While we do not expect the overall U.S. vacancy rate to rise rapidly, with an estimated 91 MSF of new office space expected to be delivered nationally in 2017 and 2018, it is unlikely that demand will be able to keep pace.

Individual markets will be driven by their own supply-and-demand dynamics, but it is looking more likely that national trends will show rental growth rates peaked in 2016 and will begin decelerating in 2017.


Retail remains a story of the haves and the have-nots, and the old cliché, “location, location, location” really comes into play.

There remain wide variations in terms of shopping center demand at the local level based on class, type and size. Neighborhood/community centers, with their core tenancy rooted in grocery or drug store anchors and mostly food- or service-related inline users, are going to be far less impacted by 2017’s wave of store closures than will any other shopping center type. Unanchored strip centers may not feel much of that pain either, although this product type (in the absence of an anchor “draw” tenant) can be volatile, especially if it is not in a premier location. Power/regional and lifestyle centers will likely feel some impact, but the bulk of this year’s anticipated closures are likely to hit mall properties.

Bear in mind that regardless of shopping center type, retailers that are reducing their store counts are generally closing Class B and C locations. The landlords of Class A or trophy properties will not experience even close to the same impact from these consolidations.

Regardless, just as a rising tide lifts all boats, the opposite is true as well. A diminished pool of tenants is bound to impact even the strongest projects, but these will still be the projects that garner the most market demand in 2017 and beyond.

Capital Markets

Similar to the office sector, the U.S. capital markets have to be measured on a market-by-market basis, but, across the board, one condition will continue to push strong performance in 2017: Demand for U.S. commercial real estate remains high, driven by foreign investors. Global monetary policy and economic conditions as well as political uncertainty will continue to push investors towards the U.S. despite domestic policy unknowns.

While valuations are high, moderating returns, pockets of value remain. “Measured Optimism” around the U.S. economic outlook is also an overall plus for U.S. capital markets, and growth is poised to accelerate in 2017 and conclude 2018 with further gains.

What are your predictions for U.S. commercial real estate in 2017 and beyond?


kevin thorpeKevin is Cushman & Wakefield’s Global Chief Economist, focusing on global economic trends and forecasts. He and the firm’s worldwide research team produce studies and statistics on topics affecting the global and U.S. economy, capital markets, finance, leasing fundamentals, property and project management and factors that affect supply-demand fundamentals in commercial real estate. Kevin has developed several econometric models to predict market trends, is a member of the National Association for Business Economics (NABE), and has authored numerous studies and survey reports. In 2014, he was recognized as the nation’s most accurate economic forecaster with the NABE’s Outlook Award.

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