Here's how Trump's policies will affect retailers
Retailers can expect incoming president Donald Trump to deliver fiscal stimulus measures that will boost consumer spending, but a larger share of that spending will be online.
Cushman & Wakefield’s latest U.S. Macro Forecast predicts that while e-commerce is poised for growth in 2017, several retail categories will be in contraction mode, and other sectors that have been in expansion mode will face saturation issues. The forecast also predicts that U.S. real GDP will grow by 2.3 percent in 2017 and will hit 3 percent in 2018.
“Even before the election, the U.S. economic fundamentals were showing signs of heating up,” said Kevin Thorpe, Cushman & Wakefield’s global chief economist. “We observed a big GDP number in Q3, accelerating wage growth, surging consumer confidence – a string of really robust trends were already forming. Now when you layer in the expected tax cuts and spending multipliers from the new administration, it creates an even stronger economic backdrop for the property markets heading into 2017.”
Although it will take time for policy to form under the new administration, Cushman & Wakefield expects that President-elect Trump, alongside a Republican-controlled House and Senate, will act to improve the U.S. economy and property markets. That said, Thorpe notes that some of the expected growth in fiscal policy will be negated by tighter monetary policy, higher interest rates, higher inflation and more global volatility.
The Cushman & Wakefield Forecast predicts the following implications for the commercial real estate sector:
- Industrial: The upbeat near-term outlook for consumer spending will trickle into robust demand for warehouse and distribution space, especially as e-commerce sales as a share of total retail sales continues to rise. Additionally, with year-over-year growth in manufacturing production set to rebound to positive territory, and with auto sales expected to remain in the 17-18 million units per year range for the next two years, the outlook for the overall industrial sector remains bright.
- Retail: Although growth in consumer spending will remain strong, a larger share of that spending is going to e-commerce. Neighborhood/community and power centers will be least impacted by contraction, while mall and lifestyle centers – especially Class B and C properties in secondary or tertiary markets – will be disproportionately affected.
- Transaction Volume: Cushman & Wakefield expects investment sales to decline year-over-year in 2016 by 15 percent, to $466 billion. This is still well above the average of $279.7 billion over the 15 years for which there is consistent transaction data. While investment sales volume is forecast to modestly decline over the next two years (-2.2 percent in 2017 and -8 percent in 2018), the firm still anticipates solid activity with yearly totals registering $455.7 billion and $422 billion, respectively. By and large, the outlook for the U.S. economy over the next few years remains positive.
“Although headwinds have come and gone and come again, the major force driving growth – the consumer – is still gaining momentum,” Thorpe said. “Of course, we are ushering in a new era of fiscal and monetary policy, and that will continue to generate uncertainty. However, we believe there will be a net positive impact on economic growth as well as the property markets in 2017 and 2018.”