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Economic Peaks & Valleys: What’s Next for Commercial Real Estate?

Recession or recovery?? Let’s take a look at both the global and the local markets.

Let me start by saying Albuquerque and New Mexico’s economic peaks and valleys are never as high nor as low as the world. We are always slower to experience what the global markets experience and our outcomes are typically less impactful.

While several factors raise the possibility of an economic downturn, the overall outlook remains positive. “Despite strengthening headwinds, economic growth remains steady,” writes CBRE chief economist Richard Barkahm. “The US and Europe continue to enjoy strong momentum from the reopening of their economies, which are not yet complete and should precipitate further above-trend growth.” Even as financial conditions tighten, the private sector will focus on retaining workers.


Why borrow trouble?

Market strategist and founder of Sankar Sharma said the country is not at the recession tipping point yet, it could take 18 to 24 months for a recession to occur without an economic soft landing. “The US Economy is highly unlikely to get into a recession because we still have low unemployment, banks are still looking robust and healthy. There is still a labor shortage. Companies’ earnings and margins are looking healthy. There is no distress in credit markets and liquidity conditions are normal.”

An economist and found of Next Generation Consulting Inc, Rebecca Ryan said right now there are just some structural issues involving too much money chasing too few goods – and while there might be a recession on paper, these issues will resolve themselves. “We are talking ourselves into a recession,” Ryan said. “Why do we want to borrow trouble? We are trying to create a massive headache when we don’t need to.” Business owners should still make investments where they need to, make sure works get raises they need and make sure they are investing for long-term growth.

Experts say employers often have a hard time finding incentives that outweigh the benefits of remote work, including avoiding commutes. A keynote at a recent local luncheon indicated employers will need to remain “flexible and pivot” when it comes to luring employees back to the office. The most common compromise is the flexibility of in office meetings 1 – 2 days per week with the balance of the work week being performed remote. Work place safety and cleanliness are some of the top requests of remote workers.


The future office

What does that mean for the future of office? While 52% of CBRE’s occupier survey respondents said they intend to reduce their office space in the next three years, another 39% of respondents indicated they plan to EXPAND their office space. Adding amenities such as gaming, food/coffee and increasing the number of private offices for the immune compromised employees ranked among the top reasons for increased footprints. What does the future of your office look like?

UPDATE: As of June 15, 2022, we recognize that the Federal Reserve has increased interest rates by 75 basis points. In a press release the Fed stated they seek to achieve maximum employment and inflation at the rate of 2% over the longer run. Although we are unsure how this will affect the overall economic health of our state, we are optimistic that the short-term outlook will remain positive and that we have a lot to continue to look forward to in 2022.

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