30 January 2020

Executive Summary

  • GDP grew by 2.1% in Q4 2019 and 2.3% for the year, matching consensus forecasts.
  • 2.3% annualized growth was the slowest since 2016, but still strong when compared with most other developed countries.
  • Consumers continued to support growth with personal consumption expenditures up by 1.8% in Q4.
  • Gross private domestic investment decreased by 6.1%. Business investment fell as uncertainty—largely stemming from the trade dispute with China—negatively impacted sentiment.
  • Tech, exports of services, residential investment and defense spending were notable contributors to growth in Q4.
  • CBRE expects the U.S. economy to grow by 2.0% in 2020 with risks skewed to the upside.
  • The outlook for commercial property markets in 2020 is generally positive.

Commercial Real Estate Highlights

  • Office: Spending on intellectual property products rose by 5.9%—the third consecutive quarter of increased growth. Exports in services increased by 6.4%. These are strong indicators that support office market fundamentals.
  • Retail: Personal consumption expenditures increased by 1.8% on an annualized basis. Consumers remain in a healthy position amid low unemployment, continued wage gains and low interest rates. Though retail continues to evolve, consumer demand ensures that retail models matching consumer preferences will be supported.
  • Industrial: Overall, consumer demand continues to support industrial & logistics property market fundamentals. Though the economic landscape remains broadly supportive, imports—an important driver of industrial demand—decreased by 11.6%. Domestic manufacturing was impacted by the ongoing challenges at Boeing. Importantly, the Phase One trade deal with China and strong consumerism support a more favorable short-term outlook for industrial & logistics markets.
  • Multifamily: Though affordability remains an issue in many markets, steady economic growth of around 2.0% and a strong labor market will continue to support multifamily demand.

General Overview

GDP growth of 2.1% in Q4 met expectations and put full-year growth at 2.3%—sufficient to maintain strong property market fundamentals. Areas of weakness were generally associated with trade disputes. Provided the Phase One trade deal between the U.S. and China remains in place, the negative impacts weighing on the economy—such as exports of goods and business investment—will decline in 2020.

CBRE expects that consumer spending in 2020 will remain underpinned by a strong labor market and low interest rates. Business sentiment should improve with lessening trade tensions. These conditions will allow for continued U.S. economic expansion with some upside potential. CBRE expects 2020 growth of at least 2.0%. Overall, the current economic landscape is generally favorable for commercial real estate and should remain so in 2020.

We are closely watching the progress of the Coronavirus. Despite the very sad human consequences, at this stage we do not expect any impact on U.S. GDP growth.

Figure 1: U.S. Economic Outlook - CBRE House View (Percentage Changes)

EW 01302020-F1

Source: CBRE Research, January 2020.

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