SPECIAL REPORT: Gangbuster U.S. Economy Not Expected Until 2014

By Keat Foong, Executive Editor

Chicago—Strong economic growth will not return to the U.S. until 2014, forecasted Asieh Mansour, real estate economist and head of Americas Research for CBRE Inc.

Mansour was speaking at the 2012 CREW Network Convention & Marketplace that took place recently in Chicago.

Mansour said the United States is currently experiencing a weak economic recovery. She explained four conditions are causing, or will cause, a slow recovery domestically: upcoming fiscal austerity; deleveraging necessitated by the housing and credit bubbles; the poor U.S. job market; and the massive slowdown in the economy in China.

The office sector is still overbuilt, and will not see interest rates fall until 2013, although Class-A office properties in CBDs are performing very well, according to Mansour. The warehouse sector is very strong in coastal markets, with occupancies in the single digits in the Inland Empire. Retailers, meanwhile, are very cautious, noted Mansour, since they see the lack of consumer confidence. Many retailers are moving to smaller footprints. The multifamily industry, meanwhile, continues to enjoy falling vacancy rates. The sector is experiencing a lot of supply, but nowhere near enough to meet the demand, she said.

The most jobs in the United States will be created in cities including New York, Dallas and Los Angeles, according to Mansour’s forecast. Colorado will experience an “on-shoring” of jobs as a result of the ramp up in gas industry activity, while Austin will experience the fastest job growth because of stable state government finances and a strong hi-tech sector in the state.

The healthcare sector has experienced the most job growth during this recovery, followed by the hospitality industry, professional business services and the hi-tech sectors.

Mansour predicted interest rates are bound to increase, to about 4.5 percent, sooner than expected. The Federal Reserve and central banks throughout the world are injecting liquidity into their countries’ economies to maintain low interest rates. Eventually, the Federal Reserve would have to unwind its huge holdings of Treasury bills, and this is often done in many countries through inflation, she remarked.

Mansour said she believed Congress will compromise to avert the fiscal cliff after the elections, but the spending cuts would be postponed. If not averted, the fiscal cliff will result in a reduction of as much as 4 percent in the GDP, according to Mansour’s calculation. The economy will see “all cylinders” growth not earlier than 2014, which will be a “really good year.”