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2018 New England Market Outlook

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A MESSAGE FROM CBRE/NEW ENGLAND...

January 2017 was an unsettling time. How could it have been anything but? Politicians and pundits of all stripes were predicting catastrophe, chaos and economic ruin as Donald Trump prepared for his inauguration as the 45th President of the United States. Educated and respected voices predicted 'Armageddon' for family finances, the American economy and the stock market, with some prophesying a seemingly endless global recession. Fortunately, this did not come to pass. Instead, the Dow Jones Industrial Average has risen some 35% since November 2016 and the economy of the United States is expected to continue its upward trajectory in 2018, with most projecting annual growth in excess of 3% this year. The labor markets continue to improve as unemployment declines and jobs are created. As has been the case since the depths of 2009's Great Recession, the New England economy and its commercial real estate markets continue to prosper.

January 2018 is an unsettling time. We hope for a continuation of 2017's economic growth, but how many years can this recovery last? How high can the stock market go? How can we continue to create jobs, and who is going to fill them? Geopolitical instability in places like North Korea, Iran, the Middle East and China looms large. Endless headlines concerning Russia, Robert Mueller, grand juries, the F.B.I., impeachment, provocative tweets and lost but not forgotten emails suddenly turning up cannot escape our attention. We are an uncomfortable, divided nation in a time of generational disruption, but we are confident CBRE/New England will find ways to capitalize on our discomfort and leverage that disruption to create opportunities and positive outcomes for our clients, employees and partners this coming year.

In times of unusual uncertainty, agility is a vital asset. We believe the local real estate markets will continue to perform well in 2018 and adapt to potential challenges. Investors in office and multifamily properties may prepare for an eventual downturn by improving capital structures with more agile debt and equity capital stacks. Meanwhile, the golden era of industrial real estate is expanding to include smaller, last-mile facilities near high-density urban centers as e-commerce grows in influence. The future of this sector may not be industrial as we know it, but a hybrid of retail and industrial. Technology has expanded retail opportunities beyond physical storefronts, but creating a dynamic in-store experience can recapture customers and reinforce a company's brand. Large occupiers of real estate need to think about agility in both individual market and portfolio terms, including lease lengths, expansion and contraction options, and availability of talent. The current labor shortage in the United States is projected to get worse, so we anticipate occupiers will accelerate their real estate investment this year in those submarkets where they hope to attract and retain talent for their businesses. New England—and Greater Boston in particular—should be a beneficiary of this strategy.

As we are accustomed to do each year, we are once again proud to report that the employees and tenants in CBRE/New England-managed properties have continued to set new standards for giving back to our communities and helping so many of our neighbors who find themselves in need of assistance. Our philanthropic initiative, CBRE Cares New England, was launched in 2010 with a mission of coordinating volunteer and giving opportunities that have a significant effect on the lives of families in need throughout New England. Since its inception, CBRE Cares New England has collected over $1.2 million worth of donations for local designated beneficiary organizations. This past year, these groups included Heading Home, Loaves & Fishes (Connecticut), Rhode Island Community Food Bank, The Greater Boston Food Bank, Goodwill chapters in Massachusetts, Connecticut and Rhode Island, Boys & Girls Clubs of America, Rosie's Place, The Gray House (Springfield), The Wish Project of Lowell and Toys for Tots.

The disruption and change we experienced in 2017 will continue and likely accelerate in 2018. There may come a time when we wish for those comparatively predictable, tranquil days of late summer and fall 2017. We look forward to reporting our observations of this coming year to you again in 12 months' time. This will continue to be a bumpy ride, so buckle up!

On behalf of the entire CBRE/New England community, we wish you a successful 2018!
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CBRE/NE Market Outlook

Contacts

Andy Hoar
Andrew Hoar
President/Co-Managing Partner
+1 617 912 7010
+1 617 912 7001
Kevin Doyle
Kevin Doyle
CFO/Co-Managing Partner
+1 617 912 7070
+1 617 912 7001