ULI Forecasts Slow GDP Growth in Short Term

The Urban Land Institute, Washington, D.C., predicted positive but slow growth for the U.S. economy until 2025–which should bring a return to stronger growth and average inflation–in its semiannual Real Estate Economic Forecast.

“Survey respondents forecast slower to negative results in real estate overall in the near term and a return to stronger growth in 2025, although the extent and timing of that differs among property types by 2025,” said Anita Kramer, senior vice president of ULI’s Center for Real Estate Economics and Capital Markets.

The forecast showed commercial real estate transaction volume dropping to $425 billion this year, compared with $730 billion in 2022. But volume is expected to rebound to $525 billion in 2024 and reach $695 billion by 2025.

It posited prices across all property types will decline 8% in 2023, but grow 2.6% and 5% in 2024 and 2025, respectively. The 2023 drop is projected to be the largest all-types drop since 2010, ULI noted.

Additionally, ULI said changes in vacancy and availability rates will vary by property type. For example, already-high office vacancy is expected to increase by another 135 basis points in 2023.

The report forecasted the inflation rate will decline significantly over the next few years, including a 12-month Consumer Price Index increase of 4.1% for 2023 and a 2.8% increase in 2024.

Real gross domestic product growth was forecasted to slow to 0.9% in 2023, compared with 2.1% in 2022. The forecast projected GDP growth at 1.5% in 2024 and 2.5% in 2025.

The Spring 2023 ULI Real Estate Economic Forecast is based on the median forecast from 41 economists and analysts at 37 major real estate investment, advisory and research firms and organizations. It addresses 27 key economic and real estate indicators, ranging from GDP and employment figures to commercial real estate transactions and property sector performance. It was conducted from April 10-24.