February 28, 2019

Executive Summary

  • GDP grew by 2.6% in Q4 2018, beating consensus expectations of 2.2%.
  • The partial shutdown of government was estimated to have shaved at least 10 basis points (bps) from growth.
  • Consumer spending was tempered, though it remained healthy, and business investment accelerated.
  • GDP growth for the year was close to 3% but is expected to slow in 2019.

Though healthy, GDP growth slowed to 2.6% in Q4 and there were mixed signals coming from the economy. On the plus side, business spending increased by 6.2% for things like software, research & development, equipment and structures. Meanwhile, consumer spending—though still healthy—slowed to 2.8% from 3.5% in the previous quarter. Housing investment fell by 3.5%.

Overall, GDP growth in Q4 showed that the U.S. economy and, by extension, drivers of demand for real estate sectors remained healthy. This was despite recent stock market volatility, which impacted consumer sentiment and may affect growth in Q1 2019. CBRE’s expectation is that GDP growth will moderate to around 2.4% in 2019. Though demand levels for real estate may be affected by slower growth during coming months, the overall outlook remains healthy for commercial real estate fundamentals.

CRE Highlights


Business investment growth accelerated to 6.2% in Q4, including spending on software, research & development and equipment. In short, the virtuous cycle of activity that fuels demand for office space remained intact.


Consumer spending growth slowed to 2.8% in Q4. Overall, consumer spending remains healthy and continues to fuel demand for retail space. Nevertheless, there were some cautionary indicators in spending for food & beverage and accommodations. Bright spots included spending on services—such as health care and financial services—and nondurable goods.


Inventories and exports boosted growth in industrial property demand. The preliminary reading on GDP also showed imports rose despite trade tensions, likely as an insurance policy against potentially higher tariffs.


The single-family housing sector was a drag on growth, likely due to higher interest rates and tax code changes. Should these factors persist, they could result in higher levels of multifamily demand.

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