The Long Economic Expansion Looks to Slow – Property Markets Will Follow

by | 17 December 2018

In our State of the U.S. Market and 2019 Outlook, Colliers outlines current economic and property market conditions and provides insight into what we can expect in the coming year and beyond.

We take stock of key economic and market indicators, including the changing global backdrop. This analysis was prepared by Colliers’ national research team, with input from Colliers’ top professionals throughout the U.S. practice.

Key takeaways from this report include:

  • Despite current strength in economic drivers, slower economic and job growth will soon begin to challenge property fundamentals.
  • Tapering global growth, fading fiscal stimulus and rising interest rates are combining to slow our economy, while escalating trade tensions represent a significant downside risk. Expect a material slowdown (but not necessarily a recession) by mid-2020.
  • The industrial sector will continue to be the top-performing property type, and the sector most favored by investors. Much of its gains have come at the expense of the beleaguered retail sector, where the shakeout is still far from over, despite recent successes in omnichannel retailing.
  • The multifamily sector’s strong demand shook off the supply challenges of the past couple of years. The sector will perform relatively well during a downturn due to structural changes and cyclical dynamics favoring renting over homebuying.
  • Supply and demand dynamics in the office sector have remained broadly balanced. This notoriously cyclical sector should perform relatively well in the next downturn, as construction has been relatively moderate and the new coworking segment may provide a downside buffer.
  • Though property markets peaked for this cycle in 2015, leasing and sales transaction activity remain robust and pricing firm. Both may slow sharply in the next two years, along with price appreciation and rent growth.
  • Tenants and investors alike should adopt more defensive strategies in advance of the slowdown. Tenants will want to seek out flexible terms, while landlords look to shed under-performing assets.

For more details, download the State of the U.S. Market and 2018 Outlook.