Economy Experts Talk Rough January and Outlook for CRE

Economy Experts Talk Rough January and Outlook for CRE

February 2016

If you pay any attention to the global economy, you know January wasn’t a ton of fun.

But still, it was just one month. Can it really say anything about the future of the commercial real estate market in the United States? Bisnow.com got the opinions of six top economists, and as you might expect, those opinions vary.

Economy

Stockbrokers struggled through the worst January since 2009 this year.

Some cautioned against paying too much attention to the market (and the resulting bluster from politicians and cable news). Others predicted pain in the short-term but economic success in the long-term. The general feeling seemed to be: “Be patient, we’ve seen this before.”

Here are the highlights:

  • Robert Bach, director of research – Americas for Newmark Grubb Knight Frank: Bach confessed some angst, but told Bisnow, “If the economy muddles through, so will commercial real estate.”
  • Ray Torto, Harvard lecturer and former global chief economist at CBRE: Torto predicts a positive long-term outlook for CRE and pins the blame for short-term struggles on factors like low oil prices and China’s drooping stock market. “Hope is not a tactic to pursue right now,” he told Bisnow. “Implement careful planning and executions.”
  • George Ratiu, director of quantitative and commercial research for the National Association of Realtors: Have no fear; the CRE market has seen this before (and recently, too). “Looking at the post-recession recovery, we’ve had other periods of volatility … which had minimal impact on CRE performance,” Ratiu told Bisnow.
  • Jack G. Kern, director – research and publications for Yardi: Kern says CRE is naturally affected by global stock markets, but doesn’t see an issue as long as proper precautions are taken. “Properties bought based on solid underwriting and reasonable fundamentals will continue to do fine,” he told Bisnow. “Those acquired without recognizing the risks properly will be back on the market soon enough.”
  • Victor Calanog, chief economist at Reis: Calanog isn’t expecting 2016 to mimic last year. “Property fundamentals rocked 2015, but we expect 2016 to be a bit rockier,” he told Bisnow.

With January (thankfully) in the rearview mirror, this CRE topic will be worth monitoring as we wait to see if the global economy improves.

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