Commercial Investment Real Estate is the magazine of the CCIM Institute, the leading provider of commercial real estate education. CIRE covers market trends, current developments, and business strategies within the commercial real estate field.
Issue link: http://cire.epubxp.com/i/536709
28 July | August | 2015 Commercial Investment Real Estate the f rst 100 days of the year. Indeed, based on the steady string of weak data, the U.S. economy looks tired. And in the back of our minds, we know the average length of an expan- sion post- World War II is just under f ve years. So is the U.S. expansion running out of juice? Is a Weak 1Q the Norm? For the last seven years, the data in the f rst quarter has gen- erally been quirky and weak; however, that initial weakness has meant diddly-squat for the remainder of the year. Since 2009, f rst-quarter GDP growth has averaged -0.39 percent — brutal — versus 2.67 percent of solid growth for other quarters. T is time around the weakness was caused by three primary factors. First, the unseasonably cold and snowy weather — the coldest in more than 20 years in certain places — played a major role. People probably are sick of hearing about the weather from economists, but its economic impact is real. Severe weather delays consump- tion, investment, travel and tourism, and con- struction and will artif cially make the economy appear weaker than it actually is. Second, labor disputes at various West Coast ports jammed the U.S. economy in certain spots. For example, container traf c at the Port of Los Angeles was down 26 percent in January and another 10 percent in February compared to a year ago. T ere is clear evidence that when the supply chain is disrupted in this manner it drags down both consumer spending and trade. T ird, the plunge in oil prices curtailed new energy-related investment in the f rst quarter, at a -23.1 percent annualized rate, which directly hit the "nonresidential structures invest- ment" component of the GDP calculation. T is drag will ultimately be more than of set by the positive multiplier low oil prices have on consumer spending — but that multiplier hasn't kicked in quite yet. In addition to the temporary drags, one has to be mindful of the soaring U.S. dollar and the weakened global economy. In its current state, neither the dollar nor the choppiness First Quarter Blues 6 5 4 3 2 1 0 –1 –2 –3 2010Q1 2010Q2 2010Q3 2010Q4 2011Q1 2011Q2 2011Q3 2011Q4 2012Q1 2012Q2 2012Q3 2012Q4 2013Q1 2013Q2 2013Q3 2013Q4 2014Q1 2014Q2 2014Q3 2014Q4 2015Q1 Real GDP, Annualized % Source: Census Bureau, Moody's Analytics, DTZ Research U.S. Fundamentals Remain Strong Household Balance Sheets Fantastic Soaring Corporate Profits Job Growth: Strongest in 15 Years 14 13 11 11 10 9 2 1.8 1.6 1.4 1.2 1 0.8 0.6 0.4 Q1 81 Q4 84 Q3 88 Q2 92 Q1 96 Q4 99 Q3 03 Q2 07 Q1 11 Q4 14 HH Debt Service Ratio Corporate Profits, $trillion Job Growth, 000's Q2 01 Q4 02 Q2 04 Q4 05 Q2 07 Q4 08 Q2 10 Q4 11 Q2 13 Q4 14 400 200 0 –200 –400 –600 –800 Mar 1995 Sep 1997 Mar 2000 Sep 2002 Mar 2005 Sep 2007 Mar 2010 Sep 2012 Mar 2015 Source: Federal Reserve, Census Bureau, DTZ Research