Richard Barkham, chief economist at CBRE, was a guest on the latest episode of Nareit’s REIT Report podcast.
CBRE is forecasting GDP growth of about 2.3% this year. With the economic momentum of 2024 continuing into 2025, “I think we're seeing the slow start to a new real estate cycle,” as vacancy begins to trend lower and rental growth generally firms and starts to head higher, Barkham said.
Barkham described investor sentiment as “very positive” given the GDP forecast and the outlook for the year, “and based on the fact that people haven't been active for two or three years, or not very active….people are anxious to get moving and adjust their portfolios and deploy capital.”
At the same time, although investors have become used to 10-year Treasury yields in the 4%-5% range, that is still acting as somewhat of a headwind, Barkham noted.
During the interview Barkham also pointed out that:
- Fundamentals in the retail sector are “extremely good.”
- Multifamily vacancy rates in the Sunbelt have peaked.
- A flight to quality is evident in the industrial sector. “We're seeing industrial space users moving from older properties, taking advantage of the new space that's been completed.”
- In office, “we've seen a terrific level of leasing in 2024, and I think that's likely to continue.” A shortage of grade-A office space could occur this year, driving rents in the upper echelons of the sector.
- It should be a “relatively robust” year for data center demand in 2025. While productivity gains in AI computing may impact demand, "it's not just AI that's driving data center demand, it's overall cloud computing as well."
- U.S. cities are showing “really promising” signs of life post-COVID. “If investors can participate in the revival of American cities, then there are long-term good gains to be made out of that.”