2015 is expected by many to be the best year since 2007. According to a Cushman & Wakefield research report, the U.S. economy is projected to grow in the 3.0 to 3.5 percent range (which is a conservative number), giving credit to the decline in oil prices. The decline in oil prices will help to “stimulate stronger consumer spending, cut costs in manufacturing and transportation and lower the trade deficit.”
Although it has been stated several times over the past couple years, interest rates are still expected to rise within the next year. According to the federal government in a statement released after the Federal Open Market Committee meeting in December of 2014, the central bank will begin to raise interest rates in the first half of 2015. The rise of interest rates will continue as the market is tested to see how much the economy can handle. As a rule of thumb, as the economy grows stronger, interest rates will push higher.
Aside from a growing U.S. economy we are also seeing a decline in unemployment, a rise in spending, and although rising, fairly low interest rates, which makes a great recipe for a strong real estate market. We can anticipate demand increasing both in purchasing and an increase in rents in all property sectors including office, industrial, retail, multifamily and hospitality.
Recent studies show business investment in the last 12 months has significantly increased, and business spending is expected to increase, boosting the economy and creating more jobs. In just December of 2014 the U.S. economy added 252,000 jobs. Over the last three months of 2014 a total of 866,000 jobs were added. The creation of more jobs can lead to an increase in demand for office space and also further demonstrates the increase in business investment and spending, creating a better environment for commercial real estate.
The sum of the U.S. economic growth is expected to pave the way for a flourishing real estate market in 2015.
Stephen Preuss is a Vice President at Cushman & Wakefield who focuses on the Queens market.