U.S. Macro Forecast: Look Through The Snow At The Fundamentals
This contributed column is sponsored by Business Facilities LiveXchange.
Posted by Heidi Schwartz
Cassidy Turley, a commercial real estate services provider in the U.S., has released its February U.S. Macro Forecast, Look Through the Snow at the Fundamentals. The report details winter weather’s impact on U.S. economic data and the outlook for the economy and commercial real estate.
“The polar vortex, ice and snow storms in the South, colder than usual conditions in the Midwest, and a major drought in parts of California all contributed in skewing a variety of indicators from job growth to home sales to retail sales – and pushed them artificially downwards,” said Kevin Thorpe, Cassidy Turley Chief Economist. “But we need to take into account the seasonal distortions and not lose sight of the economic trajectory that began taking shape in the second half of 2013. Real GDP grew by 3.7% in the last six months of last year, the strongest rate of growth in almost two years.”
“Barring any exogenous shocks, we should see GDP return to that rate of growth once the odd weather cycle subsides,” Thorpe concluded.
Highlights on the commercial real estate sector include:
Office: The office sector is evolving. Office buildings suited for the next working generation that places more emphasis on mobility and remote access, collaboration and openness, as well as on energy and efficiency are in high demand, and this type of space is typically Class A. In fact, in 2013 net absorption of Class A space was more than five times greater than net absorption of Class B and C space. In addition to divergences in building demand, office tenants are also downsizing. According to Commercial Real Estate Development Association’s NAIOP Report, the average square foot per office worker was 225 in 2010; by 2012 it was 176 square feet, and is projected to shrink to just above 150 square feet per worker in the next five years
Industrial: Nearly every major metro in the U.S. reported above average industrial absorption rates in 2013. Data centers and large big-box distribution centers that cater to e-commerce, logistics, and retail, continue to be the primary demand drivers for industrial space. With industrial vacancy approaching pre-recession levels, and demand for space still going strong, we expect the next major construction wave to begin in 2014.
Retail: Two trends are likely to become more pronounced – the competition of e-commerce sales with retail sales and diverging performance in the luxury, mid-market and bargain retail sectors. E-commerce sales currently comprise just under 6% of total retail sales. But the aggressive upward growth, which has averaged 12% each year since 2001, is expected to continue throughout the next decade.
To download the report, click here.