by Rebecca Rockey, Economist, Head of Americas Forecasting
We do not have a crystal ball, so our economists, researchers, and analysts spend a lot of time focused on market data – identifying trends and outliers, pouring over economic indicators, and consulting with industry peers. This is all to better craft a consistent message for our clients to benefit from: where we are heading and what it means to them. Our macroeconomic forecast is a key element of our process.
This is the perfect time to study what’s going on in our markets. We are on the brink of what may become a historic expansionary period. The United States, by many measures, is at full employment and experiencing unabated economic growth. In short, the economy is humming along with lagging sectors few and far between.
As we say in the report, this is an outlook – not a retrospective or a status report on current conditions. And so here are some factors that we’re keeping a close-eye on so we can adjust our advice to clients and prepare for changing market conditions as early as possible. That is the art and science of forecasting.
First, the threat of a sharp price correction in the stock market is very real and could pose a significant downside risk to the economy. Deficit-financed tax cuts, the Fed unwinding its balance sheet and the potential for a higher federal funds rate are a few factors that could trigger such an event.
Second: Office-using job growth is likely to decelerate – which impacts the space companies need. We forecast demand to register 97.5 million square feet (msf) between 2018 and 2020, putting vacancy on an upward trajectory towards 14.1% by 2020.
Third: The continued penetration of eCommerce, and newCommerce, will fuel industrial demand. Net absorption is set to exceed 600 msf over the next three years. For retail, the eCommerce disruption is concentrated in weak or ill-positioned assets, particularly Class B and C malls, and we are already seeing creative approaches and adaptive reuse of these underperforming assets. Both industrial and retail will continue to be reshaped by the growing impact of eCommerce.
And in Capital Markets, the upside risk is that some investors may want to take advantage of current pricing to liquidate assets. As interest rates increase, this may become more likely as refinancing will become less attractive.
Our forecasting platform strives to understand how the economy and commercial property market conditions will evolve over the coming months and years, and we use a combination of analytics as well as local market intelligence to inform our views because, as we say in this report, the adage that “real estate is local” has never been truer.
Read the full report, U.S. Macro Forecast.
If our forecast abilities can assist with your planning needs, please contact us for further information.
Becky joined Cushman & Wakefield in January 2014 as the U.S. Economist. Before joining Cushman & Wakefield, she worked as a consultant at a finance and economics consulting firm in the DC area, primarily working on loss forecasts for a national housing finance company’s single-family, fixed income portfolio. Prior to that, she was a junior economist at the Congressional Budget Office in the Financial Analysis Division.