By Savannah Durban, Communications Specialist
Last week, David Bitner, Head of Americas Capital Markets Research at Cushman & Wakefield, presented his 2018 forecast to Cushman & Wakefield’s clients from throughout the Southeast region. Overall, his outlook was positive both for Atlanta and the U.S., outlining several reasons for the strength of the economy.
For the first time this cycle, global growth is accelerating at the same pace, David said. If you go back to 2011-2012, the U.S. was accelerating, but the sovereign wealth crisis was going on in Europe. Then Europe improved but China slowed, and the commodity bust was dragged into the U.S. Now, Europe, China, Japan and Latin America are all accelerating at the same time as the U.S.
“This is positive for all kinds of business – trade flows, which translate into industrial; corporate profitability, which leads to greater job expansion and fuels demand for office; retail; asset pricing in general; and risk appetite,” he said. “In the U.S., we have experienced a reacceleration of growth that will continue into 2018.”
Cushman & Wakefield’s estimates, along with those of almost every other forecaster, point to 2018 being the strongest year of growth in this cycle and then only leveling off from there. The reason for this growth and why it will continue is reflected in all leading indicators.
Consumer sentiment, both current and expected, is at some of the highest levels ever seen. Global business confidence is at the highest levels of this cycle and historically high by any measure. Small business optimism, which is a large driver of investment into the economy and contributes to employment, is experiencing some of the highest levels this Millennium. Corporate profits are at an all-time high, creating the kind of budgets that can be redeployed into the expanding demand economy, creating a virtuous circle.
The biggest opportunity for investors for 2018, especially in the five-state Southeast region of Georgia, North Carolina, South Carolina, Tennessee and Alabama, is suburban office properties.
“This cycle has been interesting in that if you look at the last cycle, suburban volume was either the same or greater than CBD volume, but this cycle up until 2016 has been the opposite,” he said. “CBD properties have been so hot and so much in vogue for good reasons, but investors are very much ignoring the opportunity in suburbs, which accounts for 80 percent of inventory.”
There are stronger yields and rent growth in the suburbs, and investors are starting to catch on, he continued. Nationally, CBD office volumes were down 24 percent year-over-year from 2016 to 2017, where as in the suburbs sales were actually up 3 percent. In 2017 in the Southeast region, office sale volumes were down 1 percent compared to the 2015 peak, compared to 13 percent nationally.
Liquidity is at historic highs in the five state region. Last year, volumes were 85 percent above the long-term average, with the greatest increases in Atlanta, Charlotte, Raleigh-Durham and Nashville. Cushman & Wakefield anticipates a sustained increase in liquidity for these markets, especially as perspectives on suburban office product change, as that’s the majority of opportunities in these markets.
“So buy! Buy real estate, buy assets, stay in the market,” he concluded.
Savannah Durban is a Communications Specialist based in Cushman & Wakefield’s Atlanta office. Ms. Durban leads strategic media relations and thought leadership efforts for the Atlanta office, and oversees the firm’s online presence including managing the blog and social media efforts.