America’s Gross Domestic Product (GDP) fell dramatically during the great recession hitting a deep hole in 2009; however, since that time GDP growth has generally been positive for the past 8 years. With the typical business cycle in America averaging about 5.5 years, is the length of the current expansion an indication that recession is imminent?
Current economic signals do not yet support this view. Job growth remains positive. Wage growth is beginning but inflation remains low. Sales and GDP are growing. Capital is plentiful. America has also recently become a net neutral consumer/producer of oil, reducing inflationary spikes and recessionary pressures that formerly allowed entities such as OPEC to create economic havoc. Several real estate economists and industry experts seem to be projecting continued economic expansion for at least another 1-2 years through late 2019. Recessionary signs for which to keep a look out include rising jobless claims, falling sales, growing inflation and an increasing inventory of available single family homes.
What do all of these signs portend for commercial property owners? While there appears no need for emergency action at this moment, if an owner intends to sell or will be required to refinance his/her property within the next 2-4 years, now is the time to act. Otherwise, owners will want to be prepared to hold onto their property for likely another 5-7 years in order to wait-out the upcoming market correction and take advantage of the next expansion cycle.