Central banks won’t need to raise interest rates in the next 12 months, which will support growth for the next two years.
The global recovery for the retail, office, and hospitality sectors is underway but will likely take another 24 months to hit pre-pandemic levels, according to a midyear report from CBRE.
But despite rising concerns about COVID-19 variants and high inflation, the firm predicts pent-up demand, stimulus and reopening plans will drive growth globally over the next year for the CRE markets. CBRE predicts peak growth in GDP for the Americans and APAC this year led by the US and China, while Europe is forecast to hit its strongest GDP in 2022. Global investment volume is likely to increase by 23% this year, the firm says.
“The global recovery is well underway, but it will take several years for some sectors to approach or return to their pre-crisis levels,” said Richard Barkham, CBRE Global Chief Economist and Head of Americas Research. “Concerns about inflation likely will cause some market volatility, but we anticipate that central banks won’t need to raise interest rates in the next 12 months. This will support economic growth for the next two years and create a positive environment for commercial real estate.”
While workforces in many countries are planning to return (or have already returned) to a physical office, CBRE predicts vacancy rates for the sector will likely rise more this year before declining in 2022. The firm predicts positive net absorption for office space will return by late next year, while global leasing activity will increase 10%, a move that will be led primarily in the US and EMEA by growth in life sciences manufacturing, energy and technology. In APAC, fintech, insurance and tech will lead leasing activity.
The retail recovery “will be uneven,” according to Barkham, and new leases will likely include more detailed clauses protecting tenants in the event of major unforeseen events like the global pandemic. Meanwhile, this year will be the strongest ever for the industrial sector, as retailers adjust their inventories to hedge against big disruptions. The firm predicts third-party logistics companies will claim an even larger share of leasing activity. And multifamily is forecast to become “the leading global investment asset class” thanks to growth in EMEA and APAC. CBRE says “most” US markets will exceed pre-COVID rent levels by Q2 2022.