CRE Demand Metrics
tax increases that kicked in at the beginning of the year.
Te expiration of the payroll tax holiday along with higher
Net absorption in 2013 vs. prerecession annual averages
tax rates paid by higher-income households will begin
to weigh on discretionary spending in the second half of
160
the year. Second, sequestration cuts that took efect on
2013 annualized pace
March 1 may result in furloughs for nearly one-third of
Prerecession average
140
the U.S. federal workforce. Assuming these cuts are not
scaled back, which appears increasingly unlikely this
120
year, the combination of spending cuts and tax increases
will shave as much as one full percentage point of GDP
100
growth in 2013.
80
As a result, instead of healthy 3 percent GDP growth, the
economy will be lucky to post 2 percent growth this year.
60
Challenges from abroad also cloud the near-term outlook.
Te eurozone is still struggling through its fnancial prob40
lems with nine of the 17 eurozone countries expected to be
20
in recession for most of the year. Since the U.S. completes
approximately 17 percent of its trade with European coun0
tries, this will be another setback to growth.
Retail (msf)
Office (msf)
Industrial (msf)
Apartment (000's)
Despite these factors, there are clear signs that U.S.
consumers are becoming desensitized to these recurring
Source: Cassidy Turley Research, Reis, Costar
threats. In April, just as the sequester cuts kicked in and
as the Cyprus debt crisis fared up, consumer confdence
increased. Retail sales also rose in April even though most analysts is something very robust forming beneath the surface, but we can't
were calling for a decline. Resilient trends such as these give cre- celebrate quite yet.
dence to the notion that the core of the U.S. economy is as strong
as it has ever been in this recovery. Look past the bumps in the road Kevin Thorpe is chief economist/principal of Cassidy Turley Commercial
and focus on the bright spots: housing, energy, technology, business Real Estate Services in Washington, D.C. Contact him at Kevin.Thorpe@
proftability, and healthy household balance sheets. Indeed, there cassidyturley.com.
Housing and CRE Move in Tandem
20%
25%
20%
15%
15%
10%
10%
-10%
-15%
Existing single-family home prices, YOY % change
NCREIF Property Index returns, %
2012
2010
2008
2006
2004
2002
2000
1998
1996
1994
1992
1990
1988
1986
-5%
1984
0%
1982
0%
1980
5%
1978
5%
-5%
-10%
-15%
-20%
Source: Cassidy Turley Research; NCREIF, NAR
CCIM.com
July | August | 2013
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