A panel of economic experts offered their outlook for the macroeconomy, interest rates, and market conditions during the second day of Nareit’s REITworld: 2019 Annual Conference in Los Angeles. Panelists also discussed “late cycle” risks.
The panel was moderated by John Worth, Nareit’s executive vice president of research and investor outreach. Calvin Schnure, senior vice president of research and economic analysis at Nareit, and Michael Knott, managing director of research at Green Street Advisors, offered their economic perspectives.
Schnure noted that strong consumers are the building blocks of a healthy economy, adding that the consumer sector accounts for somewhere between 63 and 66% of overall gross domestic product (GDP) regardless of the state of the economy.
Schnure also said that the type of improvement in labor force participation and homeownership that the U.S. is currently seeing usually happens in the first year or two of recovery after the end of a recession. “What we’re seeing here is typical of the early to middle stages of an economic cycle,” which he says gives analysts some confidence on real estate fundamentals going forward.
Knott meanwhile said he characterizes the current supply and demand within commercial real estate as “pretty reasonable.” There’s been a slower rate of growth and improvement in fundamentals, he added.
Worth also discussed Nareit’s T-Tracker, pointing to its just-released third quarter results on REIT earnings. Schnure said that T-Tracker results show roughly two-thirds of REITs have FFO that has increased from one year ago.
Taking a more forward-looking approach, Knott said one of the most positive takeaways from this earning season was a continuation of strong fundamentals in the industrial sector.