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CBRE 2020 Outlook: CRE Market Expected to Experience Tempered Growth
The U.S. economy will continue its long expansion in 2020, supporting the solid fundamentals of the commercial real estate market, according to a forecast released by CBRE. The Los Angeles-based firm’s 2020 Real Estate Market Outlook foresees tempered growth in the U.S. commercial real estate market next year due to uncertainty surrounding trade negotiations, weakness in manufacturing and the approach of the presidential election season.
CBRE’s Richard Barkham says, “Next year will bring deceleration on a few fronts, but this still is an expanding economy and a flourishing property market benefiting from a robust job market, solid consumer confidence and low interest rates. 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.”
Highlights of CBRE’s Outlook include:
Capital Markets: With global bond yields expected to remain extremely low and equity markets likely more volatile, the stable returns of U.S. commercial real estate will be even more attractive in 2020. Investment volume should reach between $478 billion and $502 billion. Foreign investment should rebound next year after pullback in 2019.
Office and Occupier: The growth of office-using jobs will slow to 0.3% in 2020 from 1.5% between 2018 and 2019. The flexible-office sector will grow by 13% in 2020, down from an expected 23% in 2019.
Industrial & Logistics: The market’s streak of 38 straight quarters of positive net absorption might be hard to sustain in 2020 with vacancies historically tight. Rents will increase by an average of five percent next year.
Retail: CBRE foresees consumers more cautious next year amid uncertainty on several fronts. But rents and net absorption are likely to post small gains due to a relative dearth of new retail construction.
Multifamily: The sector is positioned for continued favorable performance in 2020, but will experience some cooling due to new supply outpacing demand. Rent control legislation will remain an industry concern. The overall vacancy rate likely will edge up by 20 basis points to 4.5% in 2020.
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