The recovery is coming, but it won't start until next year. The Real Estate Economic Forecast fall survey from the Urban Land Institute with 43 economists and analysts and 37 real estate organizations forecasts a varied recovery that will begin in 2021 and last through 2022.
Industrial and single-family assets are expected to perform the best, but the real estate market overall should holdup better than initially expected. Overall, the recession is expected to be short-lived. "The worst fears of earlier this year have mostly eased," . As of now, leading real estate economists are signaling that resilience and underlying strength will likely win out over uncertainty and risk," said William Maher, principal at Maher Strategies, in a statement.
The results of the survey, which is conducted semi-annually, expect GDP to decline 5% this year but increase again in 2021. Respondents forecast 3.6% GDP growth in 2021 and 3.2% GDP growth in 2022. The 2020 GDP loss is an improvement compared to the prior survey, which estimated a 6% fall in GDP this year. However, the previous survey was also more optimistic about GDP growth in 2021 and 2022, forecasting 3.9% and 3.6% respectively. Employment follows a similar trend. This year, the survey expects jobs loss to total 9 million, but—like GDP—job growth will begin in 2021 and 2022, growing by 3.5 million and 3 million jobs, according to the survey. By the end of 2022, unemployment could fall to 5.5%.
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The report also predicts that real estate transactions will also rebound in 2021. The survey respondents predict investment volumes will total $400 billion in 2021 and $500 billion in 2022. Respondents also expect CMBS issuances to total $60 billion in 2021 and $83 billion in 2022. This exceeds the 20-year average for CMBS issuances of $81.2 billion. In addition, the forecast also estimates flat price growth in 2021 and 4% price growth in 2022.
Real estate economists also weighed in REIT activity. While REIT returns will rise, they will not rebound to 2019 levels for some time. NAREIT, for example, forecasts .8% return from 2020 to 2022. Total returns, on the other hand are expected to hit 3% and 5.6% for 2021 and 2022. Industrial and single-family assets are the bright spot in the market. Industrial specifically will have an average return of 6.9% through 2022. For the same period, apartment returns are forecasted at 3.3%for apartment, 0.9% for office and -4% for retail. Single-family housing construction is starts are forecasted to fall to 871,250 in 2020 before rising to 940,000 in 2021 and 975,000 in 2022.
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Kelsi Maree Borland
