Slow
but
Steady
The recovery pushes forward through fiscal
policy headwinds.
Te U.S. economy is now midway through its fourth year of recovery. Ignoring
any occasional stock market euphoria, the economy remains on a consistent
path of slow improvement. Real gross domestic product is on track to grow
at a rate of around 2 percent this year, which is roughly the same growth
rate observed in the previous three years of this recovery.
While the 2 percent GDP growth has been enough to allow occupancy levels to slowly improve in most property markets, it remains
subpar to the growth rate required for widespread asset appreciation. Beyond a few standout segments such as trophy assets,
landlords generally continue to fght fercely for a thin line of
tenant prospects. Even at this maturing stage in the recovery, commercial real estate largely remains a market
characterized by clear winners and clear losers.
Te positive news: It is becoming apparent that
a more robust script is being written. Te equity
markets, housing markets, and credit markets
demonstrate that the economy has the underlying strength to grow at a much faster clip
over time. But that faster growth rate won't
happen this year, primarily because fscal policy
won't allow for it. Under current law, the fscal drag
— the combination of higher taxes and spending
cuts — will shave one full percentage point of
of GDP growth this year, making it nearly
impossible for the economy to register
anything better than subpar growth. As
that fscal drag fades in 2014, the U.S.
economy and the property markets will
be poised to accelerate.
30
July | August | 2013
Melinda Fawver/Veer
by Kevin Thorpe