Real Estate
U.S. Property Market Recovery Powers On
Though economic growth faces increasing headwinds from geopolitical tensions and inflation, the U.S. commercial property market remains underpinned by healthy macroeconomic fundamentals. The Barings Real Estate team discusses.
Economy
- Real GDP is expected to grow by a robust 3.2% in 2022, down from 2021’s exceptional annual pace of 5.7%, driven by the post-lockdown re-opening.
- Despite inflationary pressures and geopolitical tensions, consumer and business spending and the labor market are healthy and should continue to support economic and occupier demand growth.
- With CPI inflation accelerating to its fastest rate in more than 40 years, the Fed is intent on restoring price stability through aggressive monetary policy. Investors are concerned the Fed will overcorrect and halt the economic expansion.
- The invasion of Ukraine is exerting pressure on energy prices and impacting sentiment. Headwinds to growth are likely to persist over the near-term.
Property Market
- The U.S. property market has continued to recover even as volatility, driven by geopolitics and the ongoing impacts of the pandemic, continues to reverberate through global supply chains.
- Occupier demand improved across major property types over the first quarter as pandemic-related restrictions loosened across the U.S. Additional COVID variants could slow but are unlikely to disrupt economic activity as profoundly as the first coronavirus outbreak.
- Capital markets activity remained robust following a record 2021 for transaction activity. Aggregate deal volume totaled $171 billion in the first quarter, 56% above the same period last year.
- Price appreciation remains well above average with the national Real Capital Analytics Commercial Property Price Index gaining 17.4% YoY.
