The U.S. economic outlook is positive for next year, with consumer and business confidence remaining high.
Interest rate hikes will lead to gradual, moderate increases in long-term rates.
A surge in wages and higher import prices due to tariffs could lead to inflationary pressure.
If markets reevaluate inflation risk, bond rates will rise more sharply than expected, likely reducing debt capital and foreign capital inflows (due to a stronger dollar).
Slowing growth in China and Europe poses risk.
2.7% GDP growth is forecast for 2019, slightly lower than in 2018
Cap rate compression likely will end, except in some high- growth secondary markets.
Cap rates generally will remain flat, except for certain retail segments that may see moderate increases.
Stable yields will attract investors even as interest rates rise, and substantial capital available for real estate allocation will fuel acquisitions.
Investment volume should be on par with 2018, with a boost from entity-level transactions.
There will be minimal appreciation in CRE values, but income returns should remain healthy.
Cap rates’ spread over
10-year Treasury yields is expected to average 350 bps in 2019
Office-using employment growth will drive further office market expansion.
Relatively high levels of new deliveries will help meet strong tenant demand, although under-construction levels will remain below previous cyclical highs.
New product will help meet strong tenant demand for modern, efficient, highly amenitized space.
Occupiers will seek flexible space offerings and lease structures that keep them adaptable to changes in the economy and their organizational needs.
37 million sq. ft. of net absorption expected in 2019, marking the 10th-straight year of positive absorption
Flexible space offerings could account for 10% of Class A space by 2028
Continued sector evolution will occur amid the integration of logistics and retail.
Major markets with large population centers and complex supply chains will capture demand.
Secondary markets with strong gains in population will have significant growth prospects.
Occupier demand should remain strong in 2019; however, a lack of available logistics space will challenge the expansion or relocation plans of
Absorption gains may soften while average asking rents rise.
INDUSTRIAL & LOGISTICS
Demand has exceeded supply for nine consecutive years by an average of 94.1 million sq. ft. The imbalance between supply and demand has driven the vacancy rate to a historic low of 4.3%
Continued healthy retail sales growth will drive strong retail fundamentals in 2019.
Redevelopment and re-tenanting activity will increase as mall owners reposition former department store space.
Development of omnichannel strategies and significant reinvestment in physical stores will continue.
The food & beverage category will reach a pivotal turning point with the implementation of omnichannel strategies.
Total retail sales increased by 6.1% year-over-year in Q3 2018—the biggest gain since 2012
Multifamily completions will remain high, but construction starts will finally fall, promising greater market balance in 2020.
Highly favorable cyclical and secular trends (i.e., delayed marriage, delayed child-bearing and a preference for renting to maintain financial flexibility and mobility) will impact demand, translating to robust net absorption next year.
Vacancy will inch up and rent growth will be under its long- term average.
There will be high levels of investment and debt capital.
Workforce housing will be an appealing investment strategy, given its favorable supply/demand balance.
280,000 multifamily units will be delivered in 2019, slightly under 2018’s 290,300 units