National CRE News In Your Inbox.
Sign up for Connect emails to stay informed with CRE stories that are 150 words or less.
JLL Economist Discusses Issues Facing CRE Investors
With September 2024 inflation standing at 2.4% and the Federal Reserve beginning its rate cut, one question is whether commercial real estate investors can finally take a deep breath and start planning. According to an interview with JLL’s Chief Economist for EMEA, David Rea, the current environment is more stable than it has been for years.
While inflation is anticipated to stay in normal ranges, “the risk of re-emergence means making provisions remains important,” he said. “Stress-testing against any resurgence in inflation would be wise.”
Other issues Rea discussed include:
Short-Term Risks
He explained that multiple risks, including geopolitical risks, election outcomes, climate risks, and supply-chain disruption, could have an economic impact. “Disruption to shipping is something to keep an eye on,” he added. “That could have implications in the next few months for demand for logistics space, a sector which has attracted significant capital post-pandemic.” Any disruptions could also impact retail sales and profitability if goods can’t get to market on time.
Economic Growth
Rea said that there is a case for continued economic growth prospects across most markets. “I think we can say growth will be stronger in 2025 and 2026 than it has been this year and last,” he added. Economic growth will also boost real estate sector sentiment. “It’s worth remembering that the real estate cycle is lagging the economic one and is only now, in H2, starting to pick up,” Rea said.
Then There are the Yields
Rea pointed out that the outlook is for ongoing rent growth based on fundamentals. There are also prospects for yield compression. “We’re forecasting yields will begin to move in across most markets, starting in 2025, which will boost prospective capital growth as well as the appetite from investors to re-enter the sector,” he added.
- ◦Sale/Acquisition
- ◦Economy
- ◦Policy/Gov't
