#532. Short Term and Long Term Trends, and the Government – Part II

Posted on | The Agurban

Short Term and Long Term Trends, and the Government – Part II

Last week we looked at trends impacting the manufacturing resurgence in the USA.  This week we take a look at the global economies and how global demands are impacting commercial real estate in this country.

Global Demand

While American manufacturing is on an upswing, it is doing so in the face of challenges from a stagnant global economy.  Europe, in particular, continues to lag behind the USA, never having fully recovered from the Great Recession.  We continue to see good activity from European firms (especially German) looking at expanding into the USA with new manufacturing plants, both because of the bright prospects here and the more dismal ones on the other side of the Atlantic.

The BRICs (Brazil, Russia, India and China), which led much of the growth in the global economy in the early 2000s, have also stumbled in the last several years.  Both Brazil and Russia are in full-fledged recessions, while growth in China continues to slow, albeit from very healthy levels previously.

While the short term world outlook is cloudy, the continuing movement of large swaths of the world population from the “have nots” into the “have lots” is going to drive consumption and growth for many decades into the future.  Estimates are that as many as 1.8 billion people will move up the ladder of progress by 2020.

CRE Demand

The increased production and demand for American goods has started to impact the commercial real estate business.  In the 3rd quarter of 2014, industrial space absorption recorded its second highest level of absorption, since data collection started in 1993.

There is little vacant space in the prime locations for industrial space, and developers are starting to again build spec space ahead of the curve.  Fortunately, most of this spec space is in BIG distribution centers of 500,000 to 2 million sf, not the manufacturing space we are in.

Next week we will conclude our series with a look at the role of the government in job creation and the impact that regulations have on employers.