C&W: Strong Fundamentals Point to ‘Robust’ Second Half

Commercial real estate fundamentals should continue to strengthen as the economy maintains its moderate growth path, said Cushman & Wakefield, New York.

“The U.S. economy and property markets are starting to fire up again as fears of a stalled expansion diminish,” said Cushman & Wakefield Global Chief Economist Kevin Thorpe.

Global debt and equity markets have rebounded following the early-2016 financial market volatility, Thorpe said. “It is important to note that, through the heightened uncertainty, U.S. job growth continued to boom, providing a consistent reminder that the core drivers of the domestic economy remained healthy,” he said.

Cushman & Wakefield’s U.S. Macro Forecast predicts moderate growth for the U.S. economy–2.3 percent in 2016 and 2.7 percent in 2017. Final first quarter GDP growth numbers will likely be “anemic,” Thorpe said, but he predicted growth will accelerate to average 3.7 percent during the second and third quarters. “Business investment should accelerate through 2016 and peak in the second half of 2017,” he said. “Net exports will remain the most significant drag on GDP growth as the trade deficit widens due to weakening global demand for U.S.-manufactured products and the appreciation of the U.S. dollar.”

C&W said capital markets activity will likely accelerate, growing 6.9 percent from 2015 to a record $580.4 billion this year. “Continued easing in monetary policy outside the U.S., flight to quality amid global financial market volatility and growing levels of dry powder will be among the major near-term drivers of U.S. commercial real estate investment demand,” the report said. It noted that investor interest in “urban opportunities” that capitalize on the changing demographic and economic landscape remains high.

“Property markets, which responded to the year-end 2015 and early 2016 weakness, are turning a corner,” C & W Head of Americas Forecasting Rebecca Rockey said. “Across market sectors, leasing and sales activity is firming up during the second quarter.”

Rockey predicted that demand will remain strong, vacancy will tighten and rental growth will continue this year–albeit unevenly for some asset classes. “These conditions will also support stronger activity in the capital markets for the remainder of the year,” she said.