driving demand for commercial real estate are disconnected from the overall economy, even though the health of the economy certainly matters. COVID-19 wreaked havoc on demand for office and hospitality. Industrial demand remains solid because of e-commerce. Retail is in the midst of a decade-long structural realignment. A shortage of housing is pushing apartment occupancy. What weighs heavier on commercial real estate is disruption of finance and development that has been caused by inflation, an unreliable supply chain, and the Fed’s heavy-handed response. To the extent that the U.S. economy is slowing to catch its breath, a pause that allows the imbalances of pandemic to recede, the pause is welcome. The last six months of 2022 should show clearly that the pain of restoring balance will be short-lived and allow the economy to re-set. Failing that outcome, a deeper recession into 2023 is more likely. DP
Source: Bureau of Economic Analysis.
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