The U.S. property market landscape in 2016 will appear similar to that of 2015, with a number of interwoven aspects that bode well for savvy investors who can step out in front of ongoing, and in some cases intensifying, economic, demographic and technological trends.
On the economic side, the Federal Reserve made it clear in December that the central bank sees U.S. growth as relatively stable, when the federal funds rate was notched higher by a quarter point. Nevertheless, underlying inflation is extremely tame (with worries of deflation in some sectors and economies) in the U.S. and major emerging markets, providing no impetus for significantly higher rates. That may put some pressure on other global economies, including the Eurozone and China, but will also make U.S. assets more attractive in the coming year.
Most economists agree that the U.S. employment situation will remain on its current trajectory, with unemployment falling below 5 percent early in the coming year, adding to demand for housing in a variety of forms, as well as for office space, retail properties and industrial/distribution facilities. Demographic shifts that have been underway will continue, as Millennials find jobs, form their own households and either buy or rent their first homes. Baby boomers will continue to retire at the current rate of about 10,000 per day and to downsize their homes and move either to walkable urban communities or into seniors housing. Technology will continue to change the landscape in numerous ways—from the way we shop to the way we work to the way we interact with our surroundings. Some trends appear larger as we look ahead. Inspired by our conversations with industry colleagues, including several members of the Counselors of Real Estate (who produce the widely read annual Top Ten Issues Affecting Real Estate) here are six trends that we believe will play a significant role in commercial real estate in the upcoming year.