IRVINE, CA-Despite the various positive and negative indicators on which the commercial real estate industry has been reporting, the overriding feeling about the economy is seemingly positive. Peter Muoio, senior principal and economist at Auction.com Research, tells GlobeSt.com that overall he is more optimistic than pessimistic about where we are and where we're headed in the near future.

“There have been stronger job statistics in the second quarter and more indicators looking stronger,” says Muoio. “We pay attention to the degree of uncertainty in the economy, and we've been living through for several years now a high level of uncertainty. That's been one of the component pieces of why recovery has been so difficult to gauge and get off the ground. But, the most recent sets of readings indicate that uncertainty is waning, and it's a good way to get households and the economy investing and spending again.”

As GlobeSt.com recently reported, examination of first-quarter GDP growth reveals that the economy may not be as strong as we had thought it would be by now, according to Auction.com Research. At that time, Muoio said in a prepared statement that the final first-quarter GDP estimate hints at more weakness across key growth-driving components of the economy.

Nevertheless, GDP is but one factor considered when looking at the big economic picture, Muoio now explains. “There were a few things about the final GDP estimate that were striking. First, it was unusual for the third estimate to be that different from the prior estimate, and yet there was a significant downward revision. Also, the actual growth rate was very tepid for the US economy, particularly at this point in the recovery. The third element is when the government puts out a statistic, it tells us where the growth is coming from, and each of the big component pieces of the economy were revised down—not just one piece, but everything was revised down.”

What does all this mean for the commercial real estate industry? “We've been saying for some time that the pace and strength of CRE recovery is dependent on demand,” says Muoio. “When there was no development left in there pipeline from and no significant new development count out of the ground, rents begin to increase. We're totally up to that pace of demand.”

To further mitigate the earlier gloomy news about the economy, late last week Muoio's team received the most recent employment report, which showed that 195,000 jobs were added nationwide in June—very encouraging news. “We have a seesaw of recovery going on,” says Muoio. “It's not as bad as the GDP would have us believe.”

However, the jobs added were disproportionately represented by part-time jobs and lower-wage segments of the economy such as food retailing and lower-end hospitality. “There were strong numbers, but not the most high-quality employment,” Muoio says.

Still, Muoio stresses that for commercial real estate, demand is the key. “Demand that we're talking about—job growth, economic growth—those are the deciding factors for commercial real estate, and they're getting stronger.”

Instant Insights /

Auction.com: Uncertainty Is Waning

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