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Report: Retail still lags during boom times for real estate

At 4.2%, the GDP growth rate in the second quarter is the highest it’s been over the past nine years of economic expansion, and investors will be plowing money into commercial real estate, according to Cushman & Wakefield’s current U.S. Macro Forecast.

“Nearly every possible metric suggests the U.S. economy – at least as it relates to the property markets – is in excellent shape,” said Kevin Thorpe, the company’s global chief economist.

But the investor playbook will become “more nuanced,” said the report, meaning investor dollars will flow more freely into office and industrial real estate versus retail.

While Class A retail properties will continue to attract investment dollars, B and C properties will scrape for cash infusions aimed at redevelopment. Excluding urban and mall retail space, Cushman forecasts that net absorption at shopping centers will taper off in coming years, with the vacancy rate rising from the present 6.6% to 6.8% in 2020.

Noting that GDP growth will hit consumers with higher inflation, Cushman’s head of research Revathi Greenwood still sees a healthy outlook for commercial real estate.

“In general, the outlook signals that commercial real estate values will continue to rise. There’s momentum behind the current expansion, and it would take a major shock to derail it,” Greenwood said.
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