3 minute read time
July 29, 2021

Executive Summary

  • U.S. GDP grew by 6.5% in Q2 2021, well below the consensus estimate of 8.4%. However, the economy is now larger than it was before the pandemic.
  • Higher GDP growth is expected once supply chain issues currently weighing on growth are resolved and drawn-down inventories are replenished.
  • Q2 growth was driven by strong consumer spending and business investment. Consumer spending has shifted from goods to services as pandemic-related restrictions ease.
  • Commercial real estate is recovering well but will continue to lag the broader economy. While there is risk to growth from the COVID delta variant, we do not expect another economically damaging lockdown.

Commercial Real Estate Highlights

  • Office: Continued healthy investment in intellectual property bolsters the outlook for tech-driven markets (see CBRE’s 2021 Scoring Tech Talent report). The composition of economic growth bodes well for office fundamentals as spending on services surges, although this will be somewhat mitigated by uncertainty due to the delta variant.
  • Retail: Consumer spending remained strong in Q2, but less growth came from goods and more from services. This reflects supply chain disruptions and an easing of COVID fears, particularly among the vaccinated population. Transportation, accommodation & food services, recreation and financial services all saw strong gains during the quarter. This is positive news for retail segments that suffered the most amid pandemic restrictions and lower consumer confidence.
  • Industrial: Supply chains are struggling to keep up with strong consumer and business demand. Continued investment in manufacturing and logistics will strengthen the sector’s already favorable outlook.
  • Multifamily: Housing affordability is an increasing challenge for many first-time buyers as house prices surge amid low inventory for existing homes and constraints on new construction. These conditions are favorable for the multifamily market. Strong job growth also will support household formation and broader multifamily fundamentals.

The Bottom Line

U.S. GDP grew by 6.5% in Q2 2021, well below expectations of 8.4%. While supply-chain issues clearly weighed on growth during the quarter, this remains a rapid pace of growth for the U.S. Notably, the economy has fully recovered and is now larger than its pre-pandemic size. The surge of the delta variant is concerning, but we think sufficient progress of vaccinations makes an economically damaging lockdown unlikely.

CBRE expects growth to slightly moderate in coming quarters as supply chains normalize and inventories are replenished. 2021 annual growth is expected to reach near 7% before moderating to 5% in 2022. Monetary and fiscal policy are expected to keep growth levels above the long-term trend of around 2% for the next 24 months. The increased likelihood of additional spending on infrastructure bodes well for productivity and future growth over the longer term.

Strong economic growth in 2021 and 2022 will continue to support a recovery of commercial real estate fundamentals. Industrial and multifamily will continue to perform best over the near term. Office demand is expected to pick up pace in the second half of this year as offices are reoccupied. The delta variant has introduced a degree of risk to this outlook, but major office markets have relatively high levels of vaccination.


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