Recent turbulence in short-term lending from increased interest rates has caused the Fed to make liquidity injections of up to $160 billion in current quarter
Despite concerns, financial markets remain healthy as market disruptions were unrelated to the health of the financial system or broader economy
Commercial real estate investment and lending volumes remain healthy nationally and in all Atlanta sub-markets
Figure 1: Loan Spreads Tighten in Q2
Figure 2: Loan Underwriting Measures Turned More Conservative in Q2
Figure 3: Commercial and Multifamily LTVs Diverge in Q2
Broad Environment
The Real Estate Markets and the financial system as whole are in a strong position relative to the previous decade and economic growth remains healthy. The Federal Reserve Bank of New York’s Q3 2019 forecast is showing GDP growth of nearly 2.25%. Furthermore, the labor market is averaging 158,000 new jobs per month in 2019—more than enough to absorb new entrants and previously sidelined workers returning to the labor market. Monetary authorities also maintain room to maneuver with stable wage inflation around 3%
and core personal consumption expenditures—the Fed’s preferred inflation measure—under the central bank’s 2% target. This allows for action by central bankers to ensure continued economic growth without running afoul of their price stability mandate.
GDP & Interest Rate Five-Year Forecast
Commercial Real Estate
Overall, U.S. real estate investment volumes were steady in H1 2019 and are in line with the past three years (Figure 7) with Industrial and Flex space driving markets. Only retail investment volume had a notable shortfall in the first half of 2019 vs. the same period in 2018. Looking across major markets, volumes appear consistent with recent history.
Looking ahead, we see a positive combination of lower hedging costs, relatively strong performance of the U.S. economy and sound property market fundamentals as compelling reasons for continued capital flows into the U.S.
Transformative Vision
Economic and job growth continue to drive innovation and re-development
