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Is a Real Estate Downturn Imminent in the U.S.?

Jim Groch, Chief Financial Officer, CBRE
January 15, 2016

DevelopmentHousing SupplyInvesting
Jim Groch, Chief Financial Officer, CBRE, weighs in on a potential downturn in real estate in 2016

Overview

Executive Summary

The markets are more volatile and involve higher risk but Jim Groch, CFO of CBRE, does not expect a downturn in real estate in the U.S. in 2016 and anticipates markets being healthy. The flow of capital and the fundamentals in real estate are quite strong in most major markets. This real estate cycle is very different than prior cycles. Typically, after a recession it takes between six and eighteen months to recoup the jobs lost during a recession. Yet, in this most recent cycle, it took over four years to recoup the jobs that were lost in 2008 and 2009 — a radically different scenario. Thus, the market is now less than two years into a period where employment is now greater than it was in 2007. Most markets have only begun to increase rental rates in the last year or two. New development generally is not keeping pace with new net absorption. The markets continue to improve, rates are coming down, rental rates are going up and overall very healthy market environment is seen. But the potential for quite a bit of risk and volatility in 2016 exists.

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