Nov 25, 2019 - Economy

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."
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