{"id":1004652108,"date":"2023-03-13T08:51:02","date_gmt":"2023-03-13T16:51:02","guid":{"rendered":"https:\/\/www.commercialsearch.com\/news\/?p=1004652108"},"modified":"2023-03-16T12:51:20","modified_gmt":"2023-03-16T20:51:20","slug":"industrial-real-estate-outlook-an-economic-perspective","status":"publish","type":"post","link":"https:\/\/www.commercialsearch.com\/news\/industrial-real-estate-outlook-an-economic-perspective\/","title":{"rendered":"Industrial Real Estate Outlook: An Economic Perspective<\/strong>"},"content":{"rendered":"
\"Rebecca<\/a>

Rebecca Rockey, Economist, Global Head of Economic Analysis and Forecasting, Cushman & Wakefield opens NAIOP\u2019s I.CON West. Image courtesy of NAIOP<\/em><\/p><\/div>\n

\u201cTechnology is going to be among the most important things that impacts the industrial sector,\u201d began Rebecca Rockey, economist & global head of economic analysis and forecasting at Cushman & Wakefield<\/strong>, at I.CON West<\/a>\u2019s keynote session in Long Beach, Calif. \u201cThe industrial sector stands to be the first industry to experience that adaptation as the nature of our economy and demographics change.\u201d<\/p>\n

The workforce is aging, with 23 percent of current workers reaching retirement age in the next decade, and subsequent generations that are much smaller. Transportation, manufacturing and wholesale will be impacted, with around 30 percent of these workforces aging over 65 years old in the decade ahead.<\/p>\n

\u201cGDP is a function of labor, capital and productivity,\u201d she said. \u201cA slowing population and slowing workforce growth means that we need technology to help us create output at higher rates\u2014to offset lost output from less labor growth.\u201d She noted that the U.S. has been experiencing a metamorphosis within its economy for decades now, as investment in technology and research and development expand to a significant portion of GDP\u2014over half of all private investment are in these line items, which in total is nearing 10 percent of the overall economy.<\/p>\n

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READ ALSO<\/strong>: 5 Key Factors That Can Kill a Real Estate Cycle<\/a><\/p>\n

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\u201cToday we are at a point where the labor market is historically tight,\u201d said Rockey. \u201cEverything about our outlook ties to the labor market\u2014both the good and bad\u2014and that\u2019s going to dictate the entire trajectory of where the economy is headed.\u201d<\/p>\n

Right now, there are roughly two job openings for every unemployed person, and the unemployment rate hasn\u2019t been this low (3.4 percent) for 54 years. Before the pandemic, the rate was 3.5 percent, but it is not a solid comparison because there are 3.2 million fewer workers in the labor force today. This contributes to the incredible imbalance in the labor markets, estimated to be a shortage of 3.9 million workers, and represents a dynamic that is fundamentally different from the conditions in previous years.<\/p>\n

There are 2.7 million more jobs in the overall labor market than there were in 2019, although the distribution of those new jobs is highly uneven across sectors and markets. Before the pandemic, warehouse and last-mile jobs represented 9 million of the 25 million total industrial jobs that existed then. During the pandemic, those subsectors accounted for 65 percent of all new industrial jobs, driven by the explosion of e-commerce.<\/p>\n

The Fed’s perspective<\/h2>\n

\u201cWe are in the midst of a rate hike cycle<\/a> different than anything we\u2019ve seen since the 1980s, and there is a lot of discomfort there,\u201d she said. \u201cThe Fed says they need the unemployment rate to go up for wage growth to come down to a level consistent with its inflation mandate.\u201d She noted that there are signals of a downturn on the horizon, with deeply inverted yield curves, decades-low consumer confidence and the construction cycle slowing down. It\u2019s not yet reflected in job losses, but when projects underway finally deliver, there won\u2019t be new projects to immediately replace them.<\/p>\n

\u201cA recession is a necessary ingredient to right-size the economy and get it back to a place that is sustainable,\u201d she said. And while it\u2019s going to be a challenging end to 2023 and start to 2024, it sets up the second half of 2024 and 2025 for growth and the start of a new business cycle.<\/p>\n

Industrial sector’s resilience<\/h2>\n

Despite these challenges, the industrial sector is poised for resiliency, even as consumers pull back on goods spending and manufacturing contracts.<\/p>\n

\u201cWhen the economy eventually contracts, demand will slow; we\u2019re calling for a mild recession. The good news for industrial is that we are still expecting decent absorption for the next two years, then an acceleration for demand back to a growth rate of 275 million to 300 million square feet per year,\u201d said Rockey, noting that Cushman & Wakefield is calling for vacancy to go from 3.3 percent today to 6 percent, which is still considered a tight market.<\/p>\n

That 3.3 percent vacancy includes many properties built before 2000 that don\u2019t meet the needs of the modern tenant. \u201cSomething better is coming along,\u201d said Rockey. \u201cRight now, we\u2019re tracking 683 million square feet of construction, and a portion of the 424 million square feet of vacant speculative space will be leased before delivery.\u201d<\/p>\n

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READ ALSO<\/strong>: Top 5 Emerging Industrial Markets<\/a><\/p>\n

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How do supply, demand and vacancy rates translate into rent pressure? \u201cThe reality is that the double-digit rent pressure we\u2019ve had the last few years isn\u2019t sustainable,\u201d she said, noting that rents are still predicted to grow even as vacancy ticks up.<\/p>\n

\u201cFor the capital markets, we\u2019re most bullish about industrial as an asset class,\u201d she said. \u201cIn the last 6-12 months we have seen the fastest and greatest magnitude increase in the cost of debt that we have seen in 40 years. That will affect commercial real estate and all asset classes. However, even as the effects of higher interest rates percolate through markets, industrial will benefit from greater institutionalization and its very strong NOI backdrop. This makes it a stand-out in what will be an income-focused era for the next year.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"

Despite challenges, the sector is poised for resiliency, even as consumers pull back on goods spending and manufacturing contracts. <\/p>\n","protected":false},"author":2456,"featured_media":1004652113,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[21748,21783,23891,21742],"tags":[32799,32878],"class_list":["post-1004652108","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-industrial","category-investment","category-national","category-latest","tag-cushman-wakefield","tag-naiop"],"acf":[],"yoast_head":"\nIndustrial Real Estate Outlook: An Economic Perspective - Commercial Property Executive<\/title>\n<meta name=\"description\" content=\"Despite challenges, the industrial sector is poised for resiliency, even as consumers pull back on spending and manufacturing contracts.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.commercialsearch.com\/news\/industrial-real-estate-outlook-an-economic-perspective\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Industrial Real Estate Outlook: An Economic Perspective\" \/>\n<meta property=\"og:description\" content=\"Despite challenges, the industrial sector is poised for resiliency, even as consumers pull back on spending and manufacturing contracts.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.commercialsearch.com\/news\/industrial-real-estate-outlook-an-economic-perspective\/\" \/>\n<meta property=\"og:site_name\" content=\"Commercial Property Executive\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/CPExecutive\" \/>\n<meta property=\"article:published_time\" content=\"2023-03-13T16:51:02+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2023-03-16T20:51:20+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2023\/03\/Rebecca-Rockey.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"803\" \/>\n\t<meta property=\"og:image:height\" content=\"605\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"Kathryn Hamilton\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:creator\" content=\"@cpexecutive\" \/>\n<meta name=\"twitter:site\" content=\"@cpexecutive\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"WebPage\",\"@id\":\"https:\/\/www.commercialsearch.com\/news\/industrial-real-estate-outlook-an-economic-perspective\/\",\"url\":\"https:\/\/www.commercialsearch.com\/news\/industrial-real-estate-outlook-an-economic-perspective\/\",\"name\":\"Industrial Real Estate Outlook: An Economic Perspective - Commercial Property Executive\",\"isPartOf\":{\"@id\":\"https:\/\/www.commercialsearch.com\/news\/#website\"},\"primaryImageOfPage\":{\"@id\":\"https:\/\/www.commercialsearch.com\/news\/industrial-real-estate-outlook-an-economic-perspective\/#primaryimage\"},\"image\":{\"@id\":\"https:\/\/www.commercialsearch.com\/news\/industrial-real-estate-outlook-an-economic-perspective\/#primaryimage\"},\"thumbnailUrl\":\"https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2023\/03\/Rebecca-Rockey.jpg\",\"datePublished\":\"2023-03-13T16:51:02+00:00\",\"dateModified\":\"2023-03-16T20:51:20+00:00\",\"author\":{\"@id\":\"https:\/\/www.commercialsearch.com\/news\/#\/schema\/person\/8a097aa590042f6e5b88a2d8594dfcf0\"},\"description\":\"Despite challenges, the industrial sector is poised for resiliency, even as consumers pull back on spending and manufacturing contracts.\",\"breadcrumb\":{\"@id\":\"https:\/\/www.commercialsearch.com\/news\/industrial-real-estate-outlook-an-economic-perspective\/#breadcrumb\"},\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[\"https:\/\/www.commercialsearch.com\/news\/industrial-real-estate-outlook-an-economic-perspective\/\"]}]},{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\/\/www.commercialsearch.com\/news\/industrial-real-estate-outlook-an-economic-perspective\/#primaryimage\",\"url\":\"https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2023\/03\/Rebecca-Rockey.jpg\",\"contentUrl\":\"https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2023\/03\/Rebecca-Rockey.jpg\",\"width\":803,\"height\":605,\"caption\":\"Rebecca Rockey, Economist, Global Head of Economic Analysis and Forecasting, Cushman & Wakefield. 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