Gaining Steam or Overheating? A National & Regional Outlook of Q1 - Q2
In spite of all the clamor being expelled from Washington predictions for U.S. economic indicators have remained stable from 2017 into the first two quarters of 2018. Moderate growth coupled with near full employment foreshadow similar patterns and results going forward. The housing market fundamentals are healthy and multi-family development are front and center for many investor portfolios. Private consumption remains consistently positive with most analytics showing evidence of sound growth. Currently, leading indicators of industrial production and distribution point to continued acceleration matching if not surpassing the past four years. The labor market steadily is adding jobs though wages lag and have held inflationary tendencies in check. However, several factors could alter this path for better or worse and directly impact future stability in the national commercial real estate market. The recent Tax Reform legislation, proposed infrastructure improvement programs and capital spending all can have both immediate and lasting effects depending on how they are structured or the ways funding is spent. Capital spending on assets will directly correlate to a rise in productivity; while a well-crafted infrastructure plan would spur employment and enhance business opportunities on many levels. But, lurking in the wings are the issues of trade and tariff policies, such as, NAFTA, TPP and the Korean Free Trade Agreement. Economists purport that immigration is a necessity to support a near zero growth labor force. In the face of these issues current consumer and corporate optimism seems to signal the U.S. economy and with it the commercial real estate market moving toward a moderate to robust Q3 & Q4 of 2018. How these factors may manifest themselves in the commercial real estate market sectors will be explored.