Executive Summary

  • U.S. GDP grew by 4.0% in Q4 2020, in line with CBRE’s forecast but just below consensus expectations of 4.3%.
  • Q4 2020 growth was driven by residential construction, exports and companies investing in new equipment.
  • CBRE expects growth to moderate further in Q1, but rapidly accelerate in H2 2021. For full-year 2021, CBRE forecasts GDP growth of 4.9%.
  • CBRE has also upgraded its 2022 GDP forecast to 4.2% from 2.9%, reflecting additional fiscal support from the Biden administration and a robust recovery once the COVID crisis is fully resolved.
  • CBRE expects commercial real estate’s recovery to lag that of the broader economy. Over the near term, industrial and multifamily will see the strongest fundamentals. The office, retail and hotel sectors will take longer to fully recover, likely toward the middle of the decade.

Figure 1: U.S. GDP History & Forecast

chart showing us gdp history and forecast

Source: CBRE Research. Bureau of Economic Analysis.

Commercial Real Estate Highlights

  • Office: Growth in services that drive office demand remained healthy. Continued growth in intellectual property bodes well for tech-driven markets. Overall, we expect that office demand will begin to recover in H2 2021 as additional vaccine supply allows for normal activities to resume and offices to safely reopen.
  • Retail: Consumer spending softened in Q4 2020, increasing by just 2.5%. This was the result of less fiscal support for the economy and restrictions due to a spike in COVID infections. Looking ahead, consumers will be supported by the COVID-relief package signed into law in late 2020 and by wider vaccine distribution. The potential for additional stimulus provides some upside to current forecasts.
  • Industrial: Continued consumption underpinned demand for industrial & logistics space. In addition to spending directly related to consumers, such as e-commerce, industrial & logistics markets will benefit from strong exports in goods and by companies investing in new equipment. The outlook for the sector remains very positive amid expectations of continued economic recovery and structural shifts in e-commerce demand.
  • Multifamily: Multifamily will see some headwinds over the near term due to the delay in additional fiscal support. The latest COVID-relief bill included $25 billion for rental assistance, enhanced unemployment benefits and direct payments. Together, these measures, coupled with additional stimulus proposed by the Biden administration, will bolster tenants who may be struggling to meet rent obligations. Beyond Q1, an increasingly robust economic recovery will provide more lasting support for multifamily markets.

The Bottom Line

CBRE expects the U.S. economy to grow by 1.3% in Q1 2021. Beyond then, fiscal support and widespread vaccine distribution is expected to fuel stronger growth. Annualized growth in the second and third quarters is expected to reach 6.4% and 9.2%, respectively. For the full year, CBRE expects GDP will grow by 4.9%, with upside potential should the federal government enact additional stimulus.

Robust growth in 2021 will support a recovery in commercial real estate fundamentals. Industrial and multifamily will see the strongest performance over the near term. A recovery in office demand will depend on widespread vaccine distribution and occupiers returning to the office. Likewise, we expect recovery for retail and hotels will depend on a medical resolution to the crisis. Demand in these three sectors is not expected to fully recover for several years.

Figure 2: U.S. Economic Outlook - CBRE House View (Percentage Changes)

table showing cbre house view

Source: CBRE Research, January 2021.