END OF SEPTEMBER ECONOMIC UPDATE
Written by: Cade Polter
For as long as everyone can remember, the main topic of our economy has been inflation. The Federal Reserve’s interest rate hikes have cooled inflation down, but skeptics fear the economic cost of inflation may still be on the way. Costs of inflation include but are not limited to, a falling real value of savings, menu costs, and lack of investment due to market uncertainty. Government disagreements currently are not helping the market uncertainty. Congress may not continue funding the government after September 30th because of spending, border security, and the ongoing war in Ukraine. The Senate’s spending bill includes nearly 6 billion dollars for Ukraine, but President Biden is asking for nearly 4 times that amount at around 24 billion dollars. On a separate note, home prices are still on the rise. Through July, they rose by 0.6%. The rise in home prices is not due to a lack of demand. Single-family home buying is continuing to grow in popularity, but the supply of housing is experiencing a shortage and leading to high prices.
What’s Next for CRE
Still, Commercial real estate in 2023 is recovering from the pandemic derailing a booming United States economy. As the return to office movement continues, companies are going to need office space. Large cities in the U.S. are still seeing increases in office vacancy. San Francisco and New York City continue to show struggles in the office sector. Recently a Manhattan office building sold for $16.5 million but is reported that over $90 million was put into the development of it. The office vacancy rate in San Francisco is nearing 34%, this is miles above former vacancy rates. Just 2 years ago, in 2021 the national office vacancy rate was around 14%. All commercial real estate news is not bad though, new creative projects have begun. A mall in Portland, Oregon has revealed plans to redevelop into a mixed multi-family and office space. The growing popularity of online shopping has hurt shopping malls extremely, so redevelopment is a step in the right direction to keep spaces in use.
Sources: U.S. News, Globe St, WSJ