Experts Identify Five Economic Trends To Watch in 2016

economic trends

Economists with Marcus & Millichap recently identified five economic trends to watch this year for office and industrial real estate in the company’s “2016 U.S. Office & Industrial Investment Forecast.” The report focuses on economic trends regarding jobs, the oil industry, interest rates and inflation. It also explains the impact these factors have on construction in office and industrial real estate.

1. Declining oil prices may lead to a global slowdown. 

The United States economic outlook remains strong, but concern is growing over the effect of declining oil prices on the global economy. The U.S. GDP is entering its seventh year of growth, but there is speculation that a full ten year recovery and growth cycle may not occur due to market stresses on the global economy.

2. Jobs are on the rise at a steady pace.

Job growth continues in the nation, but will see a slight slowdown this year, dropping from 2.7 million jobs to 2.5 million jobs. The U.S. is currently entering its 65th month of continuous employment growth.

3. Construction in office and industrial space limited.

The 2016 Forecast predicts that completion of office space will be at two thirds of what they were prior to the recession. This will reduce vacancy rates this year, which are hovering at 14.5 percent at the start of 2016 nationally, and increase rents. Office construction is highly concentrated in Houston, San Jose, Dallas/Ft. Worth, and New York. Industrial construction remains at two thirds of the last cycle, with a greater demand for urban centered fulfillment facilities. Dallas/Ft. Worth, Inland Empire, Atlanta, and Houston have the highest number of industrial completions.

4. Investors continue to pour capital into office transactions.

Investors are looking to invest their capital in alternative places outside of Wall Street. Growth in the number of office transactions has continued at a steady pace since the end of the recession, and remain high at 22 percent above the peak of the last cycle.

5. Cap rates are heading upwards.

Cap rates are reversing course resulting in tightening vacancies, increasing rent, and price appreciation for office space this year.

Founded in 1976, Carolina Services, Inc. (CSI) is Charleston’s premier commercial space planning and improvement company. We pride ourselves on providing customers with the highest quality construction solutions that are on time and within budget. Contact us to see how CSI can help design, manage and implement innovative and cost effective solutions for your commercial space.

Source: 2016 U.S. Office & Industrial Investment Forecast, Marcus & Millichap Capital Corporation.