We have had political gridlock for the past couple years which seems to continue from what It appears to at least to some degree, and we also wonder if calmer heads will prevail. In addition, there is slow economic growth, weak job growth, and unsustainable debt levels which are here for the foreseeable future and we question if any industry can provide a meaningful boost to growth.
We are also looking at tax burdens and expenses of the new healthcare legislation, which are already beginning to be felt, and new banking regulations are on the rise. The credit crisis in Europe has already spread and the U.S. is beginning to feel the effects through lower export growth, all while the challenges in the Middle East are intensifying If there is one thing investors appear ready to do—perhaps even anxious to do—it is to turn the page on the past few years.
In general, investors want to put the past behind them, and although they may not know exactly where they are going, they know where they have been and that they do not want to return there. They know what they are dealing with, they realize that this situation will be with the nation for the foreseeable future, and they need to make adjustments in order to maximize commercial real estate investment performance and yield in this kind of environment.
We take a look at the economy as the investment environment in which people invest. The overall outlook is for a continued slow recovery, with modest economic growth over the next few years and for slow job growth to continue.
It is expected that once businesses get used to the new tax increases, that business spending (including hiring) may increase. In addition, it appears that the residential real estate market is finally starting to stabilize, and we may finally begin to see positive growth in this sector.
Sources: NAREIT, Retail Traffic, Deloitte, National Association of Realtors, NREI, P&I, Builder on Line, ENR, BEA, HAVER analytics, august 28, 2012