In the December 2012 edition of Fundamentally Speaking, Calvin Schnure, NAREIT vice president of research and industry information, discussed the outlook for commercial real estate and the broader economy in the coming year.
The economic outlook has been muddied by a number of factors recently, including concerns over the “fiscal cliff” and the impact of Hurricane Sandy on recent statistics. Schnure said the most recent employment report was in line with expectations. While the growth isn’t “exciting,” the economy is showing slow and increasingly steady improvements. The concerns of a few months ago about the economy possibly heading towards a double-dip recession have been assuaged, according to Schnure.
Schnure also discussed the latest trends in the jobs market. He said there are signs of gradual healing. For example, private payrolls have risen by more than 5 million since January 2010. Additionally, the data suggest that more part-time jobs are being converted into full-time positions.
In terms of looking ahead, Schnure said the general focus has turned to avoiding the fiscal cliff. Assuming a deal is reached in Congress, it will involve some combination of higher taxes and lower spending, which will slow the economy, according to Schnure. Consequently, 2013 is not going to start on a strong note, he said. However, as the year progresses, the economy should regain momentum, Schnure said. He also downplayed concerns about more lasting damage to the U.S. national economy.
In the commercial real estate industry, property owners are seeing a gradual improvement in demand for space. Furthermore, the economic downturn limited development and the addition of new supply to the existing building stock.
So while there’s no doubt the recovery has been slow, it is making progress and there is every reason to expect it to return to the growth rates seen in the past, according to Schnure. And with new construction at a remarkably low level, that points towards rising occupancy, stronger rent growth and higher property prices, he said.