Economists Offer 2013 Commercial Real Estate Outlook
“I don’t think we’ll see another recession,” said Mark G. Dotzour, chief economist and director of research at Texas A&M University at yesterday’s CCIM Live! economic panel luncheon. “We have too much pent up demand.”
Dotzour had the most optimistic outlook of the three economists on the panel. He cited such factors as the uptick in U.S. household net worth, exploding Internet sales, and the decline of household debt service payments as indications of an economic recovery.
Fellow panelist Mark Vitner, managing director and senior economist with Wells Fargo, was less optimistic. “U.S. fiscal policy is mathematically unsound and unsustainable,” he said, explaining that, while we probably won’t go over the fiscal cliff, significant “fiscal drag” is certain to plague the U.S. economy in 2013. He cited the expiration of reduced Social Security taxes, new taxes linked to the new healthcare law, and the impending end of federal funding for unemployment benefits as contributing factors.
Suzanne Mulvee, senior real estate economist with Property and Portfolio Research, offered a perspective on how the major commercial real estate property sectors are faring amid these economic circumstances. “The good news is that things are moving,” she said, citing falling vacancy rates in many markets. She explained that the multifamily sector will continue to be bolstered by Generation Y, but added that it might not be the best option for some investors. The office market, on the other hand, “has volatility going for it,” Mulvee said, noting an uptick in demand and a strong upside in rents. She also explained that a dearth of retail construction in the next three years will mean less retail square footage per capita and, thus, better quality retail space.