WASHINGTON, D.C. — Positive but slow growth is in store for the U.S. economy over the next two years with a return to stronger growth and average inflation in 2025, according to the latest edition of the Urban Land Institute’s (ULI) semiannual Real Estate Economic Forecast.
The spring 2023 forecast is based on the median forecast from 41 economists and analysts at 37 real estate investment, advisory and research firms and organizations.
“Survey respondents forecast slower to negative results in real estate overall in the near term and a return to stronger growth in 2025, although the extent and timing of that differs among property types by 2025,” stated Anita Kramer, senior vice-president of ULI’s Center for Real Estate Economics and Capital Markets in a release.
Real GDP growth is expected to slow to 0.9 per cent in 2023, down from 2.1 per cent in 2022. The forecast projects GDP will increase 1.5 per cent in 2024 and 2.5 per cent in 2025, at which point it will have exceeded the average GDP growth of the eight pre-pandemic years.
Commercial real estate transaction volume is forecast to drop in 2023 to $425 billion, down from $730 billion in 2022. However, transaction volume is expected to rebound in 2024 to $525 billion and reach $695 billion by 2025 (all figures in U.S. dollars).
Prices across all property types are expected to decline eight per cent in 2023, the largest all-types drop since 2010. Prices are projected to grow 2.6 per cent in 2024 and 5.0 per cent in 2025.
Changes in vacancy and availability rates vary by property type. Availability rates for neighbourhood and community shopping centres are expected to remain unchanged. Industrial availability rates are expected to inch up slightly but remain tight by historic standards. Office vacancy, already at elevated rates, is expected to increase another 135 basis points in 2023.
The U.S. inflation rate is forecast to decline significantly over the forecast period. The forecast projects a 12-month CPI increase of 4.1 per cent for 2023 and a 2.8 per cent increase in 2024, ending the forecast period at the long-term average of 2.5 per cent.
The survey was conducted between April 10 and April 24.