It’s going to take more than a presidential election to jumpstart the economy. 2013 is going to be “more of the same,” in terms of slow economic growth, real estate executives with Cushman & Wakefield said Tuesday during a third quarter market overview of the mid-Atlantic real estate market.
However, the U.S. should see strong growth in 2014, with a continuing improvement in fundamentals, including the housing industry.
So far, since the recession officially ended in 2009, growth has been slow, “because of all the uncertainty out there,” said Ken McCarthy, senior managing director and chief economist for Cushman & Wakefield, one of the country’s largest commercial real estate firms.
“One of my colleagues calls it the student driver recovery … They put on the accelerator; they put on the brake. That will probably continue to be the pattern for another nine to 12 months. Until we get some clarity, who will win the election, what the tax environment will be, what the economy will be,” businesses will be cautious, McCarthy said.
According to him, the U.S. lost 8.8 million jobs during the recession. It has recovered only about 4 million of them, or about 46 percent.
Meanwhile, the country’s GDP (gross domestic product) has increased a total of 6.7 percent since the recovery began. “If you look at previous recoveries, the average was 14 percent. This recovery has been the slowest on record,” said McCarthy.
The commercial real estate market has been feeling the squeeze. “For the mid-Atlantic, it’s dejá vue all over again’ We’re in the same place we’ve been for while. We’re seeing moderate growth. Unfortunately, the federal government is slowing down, and that affects the mid-Atlantic region.”
Nationally government leasing is down 96 percent year–over-year through the second quarter of 2012, a trend evident in the D.C. metro area, said Paula Munger, Cushman & Wakefield’s regional research director for the mid-Atlantic and Southeast regions.
With many companies playing it safe with lease renewals ― excluded from Cushman’s leasing activity ― vacancy rates are spiking up in the D. C. metro region. “We are in the fifth consecutive quarter with increases in vacancy rates. We expect it to uptick further in 2013,” said Munger. Even in Arlington County, which typically commands the highest office rental rates, the vacancy rate is 15.8 percent ―the highest on record since Cushman & Wakefield began tracking data in 1990.
Overall in Northern Virginia, the office vacancy rate is 18.1 percent, and it’s 12.7 percent in D.C.
Still, there are bright spots. Energy and technology continue to drive the economy with cities strong in these sectors ― such as Washington. D.C. and Houston ― seeing job growth. In fact, MCarthy noted that D. C. has fully recovered in terms of gaining back the jobs it lost, adding 100,000 jobs since 2010.
“There is reason for optimism,” he added. With pent up demand among consumers and a housing market on the mend, 2014 promises to be much stronger for the economy. Once there is clarity on some major issues, that, too, will move the economy along, McCarthy said.
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