Tariffs Add to the Tally: Market and Policy Factors Are Set to Pull the Reins on Supply Growth (Abstract Only)

Summer 2018

As the late summer approaches, commercial real estate conditions remain favorable, but new sources of uncertainty continue to emerge. The U.S. economy is still growing at a healthy pace and producing solid levels of real estate demand, which bodes well for vacancy and rents in a year where supply growth is expected to be elevated in multiple property types. This burst of supply growth, however, may prove short lived. The cost of construction is rising across the board. Land, labor, and materials are all significantly more expensive than just a few years ago, and government policy at home and abroad may make them even more so. As structural forces begin to exert downward pressure on demand growth we increasingly believe that cyclical factors may push fundamentals back into balance by moderating the current rate of supply growth.

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