The global economy began 2018 in its best shape since the Great Financial Crisis ended in 2009. All the major economic regions are growing at or above trend, and economic policy—both fiscal and monetary—remains expansionary.
Recent tax cuts and a booming stock market in the United States have created a high degree of business and consumer confidence that supports further spending. While there is some upside potential from a revival in productivity growth, we expect a moderate easing of growth in the second half of 2018 due to rising interest rates and any “unexpected” shocks that may arise.
Inflation surprised on the downside in 2017. While we expect global price pressures to remain moderate in 2018, due to the continued effects of globalization, technology and demographics, inflation will trend up, with the U.S in the lead. There is no reason for a rapid rise in interest rates but we are on the slow road to monetary normalization. We should expect further periods of equity markets volatility as the world adjusts to the changing interest rate outlook.
Real estate markets are buzzing with innovation. A new class of occupier is rethinking the office sector by using technology to provide a broader range of services, more flexibility and a greater sense of place. These “coworking” operators have yet to be fully “cycle-tested,” but they appear to understand how the service sector is evolving. Within the industrial & logistics sector, which remains blisteringly hot, third-party logistics (3PL) and e-commerce operators are racing to build networks that can handle same-day fulfillment and product returns as efficiently as possible. New transportation methods continue to change what is feasible. Within retail, the luxury sector has seen revival in 2017 and dominant centers continue to thrive by offering a combination of choice, innovative dining options and leisure.
Investor activity in 2017 surprised on the upside in EMEA and Asia Pacific, and moderated slightly in the U.S. The long-term benefits of investing in real estate remain in play—namely, good income return relative to bonds, long-term capital safety and opportunities to add value by investment and repositioning. Change and innovation only add to the strategies that can be adopted by real estate investors.
At CBRE, we are realistic about the likelihood of short-term volatility but optimistic about the future.
By Richard Barkham, Global Chief Economist, CBRE.
To download the CBRE 2018 Global Real Estate Market Outlook click here.