The U.S. property market landscape in 2016 has looked much like it did in 2015, with somewhat less impressive numbers, as a number of interwoven themes come into play and, yet, 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 U.S. Federal Reserve made it clear last December that the central bank sees U.S. growth as relatively stable, notching the federal funds rate higher by a quarter point. Nevertheless, underlying inflation is extremely tame in the United States and in major emerging markets (with worries of deflation in some sectors and countries), 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.
The U.S. employment situation remains on its positive trajectory, with unemployment dropping below 5 percent earlier this year, and adding to demand for housing in a variety of forms, for office space, for the retail sector, and for industrial/distribution. Demographic shifts that have been underway continue, as millennials find jobs, form their own households, and either buy or rent their first homes. And, baby boomers continue to retire at the current rate of about 10,000 per day and to downsize their homes and to move either to walkable urban communities or into senior housing. Technology continues to change the landscape in numerous ways—from the way people shop, to the way they work, to the way they interact with their surroundings.
In the second half of 2016, some trends loom large. Inspired by our conversations among colleagues, including several members of the Counselors of Real Estate (who recently produced their widely read annual Top Ten Issues Affecting Real Estate for 2016), the following are six trends that we believe will play a significant role in commercial real estate in the upcoming year.