The latest episode of our podcast, Peaks and Portfolios: Presented by PEG Companies offers a panoramic view of the economic landscape for 2023 and beyond. The episode features Richard Barkham, Global Chief Economist, Head of Global Research & Head of Americas Research at CBRE, who provides his expert insights into the unexpected economic strength of 2023, despite rising interest rates and predictions of a recession.
Barkham discusses the surprising GDP growth in the fourth quarter, fueled by government interventions and stimulus measures that mitigated a banking crisis and supported construction activity. These actions helped to dodge a potential economic downturn and provided a boost to the economy, demonstrating the resilient nature of the market.
The conversation also delves into the labor market, noting significant gains in government and healthcare sectors while corporate hiring plateaus. Despite interest rate hikes, the real estate market fundamentals hold steady, offering cautious optimism for investors and suggesting an evolution in investor behavior and capital market dynamics.
A pivot in the dialogue explores the transformation of American cities, particularly in the Mountain West and Sunbelt states. The discussion addresses the magnetism of the ‘Southern sprawlers’ due to lower taxes and housing costs, leading to domestic migration. However, Barkham cautions about the oversupply in certain markets, such as multifamily and industrial properties, while also recognizing the potential for long-term investment opportunities.
The multifamily markets in superstar cities like New York and Los Angeles are contrasted with those of the growing Southern sprawlers. These superstar cities, benefiting from international migration, have hotter multifamily markets with less new supply, indicating different investment strategies and economic outlooks depending on the city category and time horizon.
In terms of real estate trends, the episode notes the 20% office market vacancy and the shift towards remote work. The banking sector’s flexibility with loan terms to avert a crisis, and the anticipated tight market for debt availability in the coming years, are also discussed. Additionally, the future of office space is contemplated, with a nod towards office conversion to multifamily units as a complex but necessary transformation.
As the episode concludes, Barkham shares his predictions for moderate growth and further adjustments in real estate values for 2024 and beyond, while avoiding a hard recession. He also hints at the leading role of industrial real estate in recovering from the downturn in transaction activity and the resurgence of retail, particularly suburban retail, as a point of interest for investors.
This episode of “Peaks and Portfolios” not only sheds light on the complexities of the economic and real estate markets but also provides a guide for strategic decision-making in an evolving landscape. It serves as a compass for investors looking to navigate the economic uncertainties and opportunities of 2024.
Available now wherever you get your podcasts or listen here on our site.
