Nov 25, 2019 - Economy & Business

Boom times expected for U.S. commercial real estate

Illustration of a "sold" sign with ribbons, bunting, and balloons.

Illustration: Eniola Odetunde/Axios

2020 could be "one of the strongest years on record" for the U.S. commercial real estate industry, according to a market outlook released Wednesday by CBRE, the world's biggest commercial real estate servicer and investment firm.

Why it matters: Commercial real estate activity tends to be a leading economic indicator, and growth in the sector translates to more jobs and investments in local communities.

Show me the money: The CBRE report pegs 2020 investment in the sector at $478–$502 billion, which would be "on par with the prior two years" and would represent "one of the strongest years on record."

  • That includes money put toward multifamily housing, retail, data centers, office space, industrial buildings, etc.
  • "Amid slower economic growth and global uncertainty, U.S. commercial real estate will remain a haven for investment in 2020," the report predicts.
  • Factors cited for CBRE's bullishness: low inflation, low interest rates, strong consumer spending, increased capital flows into the sector, and solid property fundamentals.

Furthermore, CBRE asserts: "Barring any unforeseen risks, we assess that a recession will be avoided, thanks in large part to the stimulatory effects of the Fed's rate cuts in 2019."

Yes, but: CBRE also foresees "tempered growth" in the market because of "uncertainty surrounding trade negotiations, weakness in manufacturing and the approach of the presidential election season," according to a release.

Bottom line: "Next year will bring deceleration on a few fronts, but this still is an expanding economy and a flourishing property market," said Richard Barkham, CBRE's chief economist and head of Americas research, said in a statement.

  • "We'll see resilience across asset classes such as office, retail and multifamily as demand continues to buoy those sectors. And we see transaction volumes and capitalization rates staying relatively stable."
Go deeper