ULI’s Fall Real Estate forecast shows continuing optimism for bounce-back

WASHINGTON D.C.—The Fall 2021 ULI Real Estate Economic Forecast for 2021 to 2023 projects a recovery to pre-pandemic levels for many U.S. real estate indicators by 2023 but volatility in some sectors including hotels.

GDP growth for 2021 is revised down from the spring 2021 forecast of 6.5 per cent to 5.7 per cent, stated a recent release. Longer-term forecasts remain stable, falling in 2023 to 2.5 per cent, which is still above the 20-year average of 1.73 per cent and close to 2019 levels of 2.3 per cent.

Inflation forecasts for 2021 have risen substantially from a projection of 2.8 per cent in spring 2021 to 4.3 per cent in the fall. The forecast is optimistic about this spike receding rapidly to near 2019 levels in 2023.

U.S. interest rates are expected to climb gradually from 0.93 per cent in 2020 to a projected 1.6 per cent in 2021 and reaching 2.25 per cent in 2023. These are lower levels than forecast in spring 2021 and remain comfortably below the 20-year average of 3.07 per cent.

The semi-annual survey of economists and analysts addresses 27 key economic and real estate indicators, ranging from GDP and employment figures to commercial real estate transactions and property sector performance.

“The U.S. economy remains relatively attractive for real estate, especially in contrast with the period immediately following the global economic downturn in 2008/9,” said Ed Walter, ULI Global CEO, in a statement. “While prolonged high inflation could damage the viability of pipeline projects, the short-term spike predicted should have less impact.

“The real estate sector is in a strong position to build its way out of the pandemic and take the economy with it.”

Expected returns from real estate are fairly stable year on year and show little departure from spring 2021’s forecasts. For capital markets, the forecast shows growing optimism about commercial real estate transaction volumes in the next three years with forecasts falling just short of 2019’s peak of $617 billion. A total of $515 billion in transactions is estimated for 2021 and then temporarily reaching $600 billion in 2022 and remaining there 2023.