The U.S. economy did very well in 2024, said Barbara Denham, lead economist for Oxford Economics, and the forecast for the coming year is more of the same—both in New York City and across North America. However, in presenting Oxford’s favorable economic forecast for 2025 at a ULI New York event last month, Denham also noted many caveats ahead of the incoming U.S. administration.
“The U.S. economy is on solid footing,” Denham said, “with strong consumer spending, GDP growth, business investment in equipment, and lower interest rates.”
But the future holds huge uncertainties for the commercial real estate markets, and the U.S. economy, starting with proposed federal policies on trade and immigration under the next presidency.
For New York City in particular, the local economy may have regained some of the energy it had before the coronavirus pandemic, but uncertainly also hangs over the city’s future. Much of the recent economic growth has been dependent on immigration, Denham said, and any kind of deportation policy would change the outlook.
“We’re in for a wild ride,” she said, “especially over the next two years.”
Uncertainty shadows a strong domestic economy
“Our outlook for GDP is pretty solid,” Denham said. The indicators that economists use to forecast the gross domestic product (GDP) for the U.S. are strong and have been getting stronger.
According to Oxford’s forecast, the second presidency of Donald J. Trump is likely to help the U.S. economy in the short term. That’s largely because the incoming Republican Congress and the new Trump administration intend to renew 2017 personal and corporate tax cuts that were set to expire.
“That will drive healthy income from a business and consumer point of view,” Denham said, “and that will help GDP growth.”
Largely because of these tax cuts, Trump’s anticipated policies, overall, are expected to add nearly a percentage point to real GDP by 2027, according to Oxford. Over the longer term, however, higher tariffs with foreign trade partners and tougher immigration policies—including “mass deportations”—would likely be a drag on the U.S. economy.
“Eventually, tariffs will boost inflation,” Denham said, “but likely not as some fear.”
The positive outlook for 2025 will also be tested by uncertainty over the proposed tariffs by the incoming Trump administration. Oxford’s forecast includes a projection that the overall “effective U.S. tariff” will rise to about six percent, up from about three percent in 2024. However, the incoming Trump administration has proposed a tariff of 10 to 20 percent on all imports in addition to a 60 percent tariff on all imports from China. If the Trump administration imposed all of its threatened tariffs, the overall effective U.S. tariff rate would rise to about 18 percent, the highest it has been since the 1920s, according to Oxford.
As the forecast puts it: “We assume that the U.S. will impose blanket 30 percent tariffs on Chinese exports in the opening salvo of a renewed trade war next year, and added tariffs on South Korea, Japan, and Vietnam.”
Immigration policy is another uncertainty in the forecast. It is difficult to even count how many undocumented workers are currently in the U.S., let alone predict the result if many were suddenly deported.
“It’s going to be really hard to really capture what’s happening,” Denham said. For example, data from the Bureau of Labor Statistics (BLS) show the number of permits filed for new manufacturing construction increased 200 percent since 2019. In contrast, construction employment is up only about 20 percent over the same period.
“There’s probably a lot of construction employees that are not in the BLS statistics,” the economist said. “That means if they have to leave [the country], they’re not going to show up in the labor market statistics.”
Denham said demand for real estate remains strong—especially housing, including apartments—but a buyer now needs an income of $108,000 a year to afford the median-priced home. That’s twice the income needed in 2019, and it’s driving many toward the rental markets.
Other real estate sectors are expected to do well in 2025, Denham said. The warehouse sector, for example, is improving after a sharp correction. “We think things have bottomed out there,” she remarked. Retail properties are also beginning to adapt to the rise of e-commerce, as non-traditional retailers and restaurants expand. “You see some pretty strong growth in the retail sector in 2024,” she added, “but much lower than we’ve seen in the past.”
Hotel properties also continue to improve. “The hotel sector is certainly on the mend,” Denham said. “A lot of people continue to travel, [so] you know people are spending more on experiences.”
NYC outlook strong—with caution
In many ways, Oxford’s forecast for New York City is the same as the national outlook—only more so. The city’s economy has regained some of its pre-pandemic energy, but it could be especially vulnerable to changes in federal immigration policies.
“We have exposure to possible deportations,” Denham warned, “and a drop in immigration.”
In 2022, 2023, and 2024, the number of jobs in the New York City metropolitan area grew at a faster rate than in the U.S. overall. New York City also lost jobs more quickly in 2020 and recovered jobs more slowly in 2021. The city had just 2.6 percent more jobs at the end of 2024 than the region had before the pandemic, compared to 5.1 percent for the U.S. overall.
“We still have a long way to go,” Denham said. “We suffered far more during the pandemic, but we are emerging in very good health.”
The population of New York City is also likely to grow in 2024, after shrinking from 2021 through 2023. New York typically receives many new residents from other countries, and it will net new residents from other parts of the U.S. in 2024.
“I am very bullish on New York [City],” Denham said.
