CBRE sees continued economic growth, rising employment in 2018

CBRE’s 2018 U.S. Market Outlook forecasts market performance in 2018 for all major commercial real estate sectors and sees continued economic growth and rising employment in 2018, which should benefit all major asset classes.

Beyond the fundamentals of supply and demand, the report explores certain macro factors that are likely to impact the industry: tax reform, infrastructure spending, immigration policy, healthcare policy, business spending and investment, among others.

For the next three years, CBRE predicts we will likely see cap rates flat at best or rising, which it expects will outstrip property income growth. The economy’s performance over the period will determine whether commercial real estate values continue to rise mildly, remain relatively flat or decline mildly or moderately.

Breaking it down by real estate sectors, the U.S. office market growth should continue in 2018, but at a slower pace, due to higher completions and the tight labor market’s impact on tenant demand. Demand for high-quality, well-located industrial real estate should not wane anytime soon, while changing demographics, consumer expectations and omnichannel retailing will continue to reshape retail and its real estate environment in 2018. The consumer trend toward off-price and discount retail will continue, with mid-range retailers seeking new ways to limit share losses to lower-priced players.

Multifamily developers are poised to register the second-highest annual completions count of this cycle in 2018, down by 9.2 percent from 2017’s cycle peak. Because apartment starts began to slow in 2017, the multifamily market will get a reprieve from new supply by late 2018 and throughout 2019. Forecasts for continued U.S. economic expansion portend a favorable year ahead for the U.S. lodging industry, with forecasts of income and employment growth, coupled with slowing supply growth, promising increased demand for hotels.

CBRE’s 2018 U.S. Market Outlook report can be found here.