ULI Spring Economic Forecast Sees Real Estate Metrics Outpacing Long-Term Averages

Economists and analysts at leading real estate organizations say key industry metrics are likely to outpace long-term averages between 2021 and 2023.

The Urban Land Institute’s (ULI) latest Real Estate Economic Forecast, based on an April-May survey of 42 economists and analysts, found GDP and employment growth, the unemployment rate, and real estate transaction volumes all trending ahead of long-term averages.

Nareit Senior Economist Calvin Schnure, one of the 42 survey respondents, says the results show that commercial real estate markets are likely to be buoyed by a strong rebound in economic activity and job growth over the remainder of this year and next.

Among the ULI survey key findings:

• GDP is expected to rise by 6.5% in 2021, up from -3.5% in 2020. It is expected to rise 3.9% in 2022 and 2.5 % in 2023—both exceeding annual growth rates from 2010-2019. Growth of 2.5% in 2023 would be within range of the highest annual growth rates during that ten-year period.
• For net employment, a three-year recovery process is forecast with growth of 5.5 million jobs in 2021, almost 60% of jobs lost, and growth of 3.0 million jobs in 2022, an additional 30% of jobs lost. With the forecast of further growth of 2.1 million jobs in 2023, three-year job growth is then expected to exceed the total lost.
• The national unemployment rate is forecast to be at 5.0% for 2021, before dropping to 4.1% in 2022 and 4.0% in 2023, below the 20-year average of 6.0%.
• Commercial real estate transaction volume in 2021 is expected to total $500 billion, with 2022 levels rising further to $550 billion. Expectations for CMBS issuance is $70 billion in 2021, rising to $85 billion in 2022 and $90 billion in 2023, with 2022 and 2023 both exceeding the 20-year average of $82 billion.

The survey also noted that warehouse and apartment occupancy and rent growth are predicted to outpace long-term trends. In 2021, industrial and apartment rent growth is forecast to be 4% and 1.7%, respectively, and 3.7% and 3% respectively in 2022. By 2023, positive rental growth is forecast for all sectors, ranging from 3.1% for both the industrial and apartment sectors to 1.5% and 2% in the retail and office sectors, respectively.

Meanwhile, housing starts exceeded the 20-year average in 2020 for the first time since the financial crisis. Housing starts are expected to continue to increase to 1.1 million in 2021 and 1.2 million in 2022, and remain at that level in 2023.