2024 U.S. Macro Outlook: Rolling Recession is Here

Cushman & Wakefield released its 2024 U.S. Macro Outlook report which describes the economic landscape as a rolling recession, one in which some industries contract while others continue to expand. Sectors that are currently experiencing some version of a recession include manufacturing, transportation and warehousing, finance and real estate. But the report emphasizes that within the commercial property sector there are both strengths and weaknesses.

“The backdrop for CRE in our baseline forecast is one with many shades of grey. Some sectors that are decelerating will probably surprise onlookers with their resilience — such as what we envision for industrial and multifamily demand. As for retail, limited supply puts a cap on just how high retail vacancy will go,” Rebecca Rockey, deputy chief economist and principal author of the report, said. “Although office is complicated, we believe we are well into the hybrid transition, and thus demand destruction will start to taper off. Nuance here matters and underscores the importance of fully understanding the sector to maximize opportunities for both occupiers and investors.”

Key Findings


U.S. office vacancy will peak in early 2025 at 21.5%, up another 210 basis points (bps) from today’s 19.4%.

Effective rents will decline another 5.4% in 2024, bringing the total expected peak-to-trough decline to 23%.

After peaking in Q1/20 at 135.2 million square feet (msf), the office construction pipeline has receded by more than 50%, sitting now at 63.5 msf with little promise of a pickup anytime soon. Cushman’s economists note that the weakness in the construction sector is likely to benefit the highest quality segments of the property markets and, in general, help existing buildings repopulate a bit quicker.

By 2025, Cushman & Wakefield’s modeling indicates that most firms will have completed their downsizing as it relates to hybrid and remote work, allowing for the relationship between job growth and demand for office space to reestablish itself, and the office sector will begin to register positive absorption once again. From 2025 through 2033, the outlook calls for 222 msf of net absorption to be realized.


Industrial net absorption downshifted in 2023 coming off frenetic back-to-back years in 2021 and 2022.

Since the industrial boom that brought vacancy down to 2.8% in Q2/22, vacancies have been drifting higher, rising to 4.7% as of Q3/23. Vacancy will peak in early 2025 at 6.2%, roughly 200 bps lower than the historical average.

A decent share of the existing construction pipeline is accounted for, and development will taper off quickly as construction starts (measured in square feet) are down by 60% thus far in 2023. Cushman & Wakefield forecasts demand to return to its pre-pandemic pace (around 275 to 300 msf per year) by 2026 while completions start to ramp back up. The current supply-demand imbalance will reverse, and vacancy will return to sub-5%.


The resilience of U.S. consumers has been a key ingredient supporting economic growth and the CRE retail sector this year.

The number of announced retail store openings year-to-date is outpacing closures by a margin of 1,000, thanks primarily to the nearly 1,800 net openings in the discount sector alone.

Construction has been subdued during the recent period of healthy demand, leading to historically tight vacancy rates and rental increases. Cushman & Wakefield’s baseline forecast projects that net absorption will decline by only 11.4 msf between 2024-2025, less than half of the pullback experienced in 2020.


Despite an unprecedented supply wave, the apartment market is enjoying a solid year characterized by healthy rental demand and positive rent growth.

Macroeconomic and demographic factors have contributed to resurgent demand this year. Amid sharply higher mortgage rates and buoyant single-family home prices, the economics of renting versus owning have never been more favorable.

The national vacancy rate will increase from its current level of 7.8% to reach 9.0% at the end of 2024 as leasing momentum slows, before retreating to historical norms.

New supply is expected to crest in early 2024 and we are forecasting 400,000 new units to come online next year in total. But after that, supply is set to slow abruptly, settling into an average of 183,000 units delivered per year from 2025 to 2027, nearly 25% below the 2015 to 2019 average.

Capital Markets:

Uncertainty surrounding Fed policy on interest rates remains a central theme, as markets have witnessed the 10-year Treasury fluctuate from 3.5% at the start of the year to as high as 5.0% in October.

Transaction volumes have fallen sharply since the record-setting second quarter of 2022, and year-to-date CRE sales this year are off 56% from a year ago.

The pricing adjustment is expected to accelerate in 2024 as needs-based sellers will be incentivized to market properties at prices consistent with higher interest rates. In the baseline forecast, cap rates are forecast to expand significantly as a result.

Property values are expected to turn the corner in 2025 as diminished uncertainty, lower interest rates and inflecting net operating incomes spur increased buyer and lender conviction, which will help to launch more fluid transaction activity. Dry powder targeting CRE investments continues to accumulate, particularly across opportunistic and value-add strategies.

To see the full outlook, with sector-specific data for office, industrial, retail, multifamily, capital markets and niche assets, click here.

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Terry Mulreany
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