CBRE has released the 2021 U.S. Real Estate Market Outlook, calling for a strengthened recovery of all U.S. commercial real estate sectors as the broader economy bounces back from the pandemic-induced recession and even as a potentially split federal government tempers fiscal stimulus plans.
The outlook anticipates that sectors like office, retail, and hotels will begin a slow recovery next year. Meanwhile, industrial and logistics real estate and data centers will extend their rapid early recovery that is already underway, and multifamily will start its own swift rebound. All sectors will benefit from the widespread availability of a vaccine, a prospect that was enhanced by Pfizer’s November 9 announcement of a treatment that it says proved 90 percent effective in preliminary trials.
Interest rates are expected to remain low, even as gross domestic product (GDP) rebounds by 4.5 percent next year. The spending plans of President-Elect Joe Biden will be moderated if the GOP retains control of the Senate after two runoff elections in early January. Elsewhere, the president-elect’s plans could result in increased demand for health care real estate and for properties tied to infrastructure and R&D.
“Overall, we expect the real estate recovery—particularly the office sector—to lag the broader economic recovery by several quarters. This follows the pattern of previous cycles, but with the added complication of getting people back into the workplace,” says Richard Barkham, CBRE global chief economist and head of Americas research. “Two factors are essential for this recovery to take hold: a medical resolution to COVID-19 through a vaccine and other measures, and another fiscal stimulus package.”
In real estate capital markets, CBRE expects that the improving economy—alongside aggressive quantitative easing by the Federal Reserve—will hold values stable and, in some cases, put downward pressure on capitalization rates. For now, a wide gap remains between buyers seeking discounts and sellers not willing to offer them, but this will narrow over the course of the year. Investors have about $300 billion earmarked for real estate investment, much of it in North America.