Economy Watch: U.S. Engine for World Economy, Domestic Real Estate Benefits
- Mar 14, 2016
Much of the world’s economy is troubled, or at least weaker than it has been recently, yet the U.S. economy continues to be one of the bright spots worldwide. That was one of the takeaways of a speech last week by World Bank Managing Director and COO Sri Mulyani Indrawati at the National Association of Business Economics Conference in Washington, DC.
“The global economic environment is weak and fragile and getting more volatile,” she noted. “The only engine of growth is the US economy, while Europe is still struggling to recover and is now facing additional downside risks from a looming Brexit and an ongoing refugee crisis. Japan is responding to continued weak growth by loosening their monetary policy and adopting negative rates.”
Sri Mulyani also said that emerging economies and developing countries—engines of growth during the last decade—are also underperforming. Brazil and Russia are in recession and China is slowing down. Global trade is not picking up and productivity growth remains weak.
Though the World Bank COO didn’t specifically talk about real estate, the fact that the U.S. economy remains strong while the rest of the world lags does have implications for domestic CRE, and especially the flow of investment capital into the United States. Economies such as the Chinese might be relatively weak, but that doesn’t mean that investment capital for U.S. properties—considered a safe haven that offers strong returns—has dried up completely. In fact, U.S. CRE still beckons.
For instance, just over the weekend, it was reported that the historic Hotel del Coronado near San Diego were being acquired by a Chinese insurance company as part of a $6.5 billion deal for a portfolio of hotels. Blackstone Group agreed to sell its Strategic Hotels & Resorts Inc., which owns 16 hospitality properties, to Anbang Insurance Group.