US Economic Recovery is Becoming Increasingly Fragile

Real Estate

DALLAS—While initial unemployment claims are continuing to fall, consumer confidence dropped to a six-year low in August, according to CBRE’s market update on the industrial and logistics sector. However, there are some strengths worth noting, including the industrial and logistics sector’s resiliency.

“The promising US economic recovery is becoming increasingly fragile, with strong retail sales and strong home sales on the plus side versus weakening consumer confidence and delayed federal stimulus efforts on the downside,” says Spencer Levy, senior economic adviser and chairman of CBRE Americas Research. “CBRE continues to forecast the economic recovery continuing through this year’s second half and gaining momentum in 2021. However, this outlook relies on a stimulus package being enacted and a vaccine being deployed by Q1 2021. While many sectors of commercial real estate are still taking stock, the industrial and logistics sector has hardly broken step. E-commerce growth has accelerated in the past six months to account for 20% of total US retail sales, up from 16%. That foreshadows a need for hundreds of millions of square feet–if not billions–of warehouse and distribution space in the coming years.”

CBRE’s outlook for the economy and the US industrial and logistics market in major cities shows the sector posting its 41st straight quarter of positive net absorption/demand in the second quarter of 2020. US vacancy hovers near its all-time low at 4.7%. Developers have roughly 314 million square feet under construction with 37% pre-leased. CBRE forecasts that the combination of accelerated e-commerce growth and retailers’ push to keep larger inventories on hand will foster US demand for more than 2 billion square feet of new warehouse and distribution space during the next decade.

As for Texas, everything is bigger here and construction levels are also holding steady, says the report.

“Big-box warehouses remain the dominant format for new construction in Dallas/Fort Worth,” Levy tells GlobeSt.com. “Overall, construction levels remain consistent with the market’s output of the past six years.”

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