Summary

The U.S market is estimated to be valued at more than 1 trillion dollar and is expected to grow by a CAGR greater than 1% during the forecast period.

The US economic growth in 2020 is expected to slow to between 1.5% to 2% from an average of 2.5% over the last five years. It is because of various factors that create uncertainty, including the ongoing US-China trade war, slowing global growth, and a presidential election coming up. The slow growth is going to continue in 2020, broadly supporting already strong property market fundamentals benefiting from a robust job market, solid consumer confidence, and low-interest rates in the economy.

The commercial real estate continues to recover from demand across office, retail, and multifamily sectors. The demand for office spaces to remain strong in 2020, leasing activity will be mainly driven by tech tenants. However, the transaction volume and capitalization rates to stay relatively stable.

In the office sector, new construction will outperform net absorption, resulting in a net increase to the national opening rate and a slowing of rent development. For retail, rents and net absorption are likely to post slight gains due to a relative shortage of new retail construction. Multifamily is positioned for continued satisfactory performance in 2020 but will experience some dampening due to new supply overtaking demand. Trends likely to gain force in 2020 include developers converting malls to mixed-use multiplexes, Generation Z boosting traffic at retail centers, and health and wellness operate taking more retail space.

Key Market Trends

Office Demands Shifts Towards Flexibile and Alternative Models

The US office market showed substantial growth in third-quarter 2019 with slowdown apparent in the market. Occupancy remains at a record high while net absorption fell with rents continued to rise. High-growth tech, creative, and life sciences residents continued to drive occupancy gains, while the coworking sector experienced decreasing growth with more friction expected ahead. Despite new supply hitting the market, vacancy currently rests at just 14.2% nationally, while a smaller number of completions led to yet another robust quarter for absorption.

The vacancy may tick up slightly due to the rising volume of construction, asking rents are likely to continue to rise steadily, especially in tighter markets. It is expected that the tech sector will remain the largest lessor of space for the balance of the year. In addition, financial services and coworking should post steady growth as well.

Multifamily Completions To Remain Robust In 2020

The overall multifamily vacancy rate is likely to rise by 4.5%, still below the long-term average of 5.1%. Rent growth will flank down to about 2.4%, just beneath the long-term average of 2.6%.

The development will continue in both urban and suburban areas next year. The geographic emphasis, however, is shifting to the suburbs both mid-rise urbanesque products in the densifying suburbs and garden products in a more traditional greenfield setting.

Multifamily developers expected to remain very active in 2020. Permits, starts, and completions were all at or near this cycle’s highest levels in 2019. Multifamily lending activity is also rising due to an expected increase in financing opportunities. The top four markets for multifamily performance are Austin, Atlanta, Phoenix, and Boston.

Competitive Landscape

Commercial real estate in the United States has a low level of market share concentration. The industry is extremely diverse and covers a large sector of the economy. Commercial real estate activity has a medium level of capital intensity. Competition between providers will continue to drive market pricing and contractual terms, creating aggressive leasing scenarios. Key players in the commercial real estate market are Simon Property Group, Franklin Street, Shannon-Waltchack, and Progressive Real Estate Partners.

Additional Benefits:

The market estimate (ME) sheet in Excel format
3 months of analyst support

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