Another Expert Votes for a Soft Landing

Economic data have improved incrementally in recent months, signaling perhaps that the economy is headed for a soft landing and commercial real estate could have a strong year overall, according to John Chang, senior vice president of research services, Marcus & Millichap.

In 2022, the outlook in January was for 2.6% growth but then it steadily moved downward through October, when the forecast hit its trough at 0.2%. In 2023, it’s now forecasted for 0.7% growth.

“That sounds like a soft landing to me,” Chang said in a recent economic update video Marcus & Millichap produced.

“Strong jobs creation and consumer spending data early this year make it even brighter. Indications are that data this year will be stronger than expected.”

However, that could trigger higher inflation “and the Fed will feel obligated to raise rates more in March and May,” he said.

It is estimated that the Fed will raise rates by a total of 100 bps for the year.

“However, a 50 bps hike this year could stall out CRE investment, at least for the short term as it recalibrates,” according to Chang. “It’s still possible to have a mild recession in 2023 and still have positive growth on the year.”

So, he thinks that moderate, steady growth and repaired supply chains could keep the Fed from raising rates too aggressively and create a surge in CRE investments.

“We are not out of the woods,” Chang said. “We could get a curveball. But each month, the data get stronger and could create a favorable outcome.”