JLL’s top economist sees the probability of a recession as low, but said that geopolitical upheaval, global fear generated by epidemics like the spread of the coronavirus and the upcoming presidential election can create some turbulence in the real estate market.
“I reasonably expect the economy to slow a little,” JLL Chief Economist Ryan Severino told attendees at the firm’s “Sunshine State of the Market” event at the Four Seasons Hotel Miami on Wednesday. “I don’t think we are on the precipice of an implosion. I don’t think it is all doom and gloom.”
Severino expects the Federal Reserve to hold off on making more cuts to the interest rate in 2020. Without the looming threat of recession, the Fed would prefer to hold off on any more cuts, he said.
“They are really running out of ammunition to blunt the impact of a recession if it comes at some point and time,” Severino said. “I think they may make one move…. At some point you run out of interest rates to cut and you don’t want to find yourself in that position.”
The Miami market, he said, is still benefiting from population and job growth in Florida, which he tied to the region’s dependence on trade with Latin America.
“The Miami market is growing faster than the overall U.S. market,” Severino said. “I see a market that is tethered very strongly to Latin America, one that has good trade linkages despite the blowback on globalization.”
He pointed to the commercial and residential development boom that has transformed Miami neighborhoods such as Edgewater, Midtown Miami and Wynwood. “When I first started coming to Miami in the late 1990s and early 2000s, we would go to South Beach,” he said. “You were confined to that one part and couldn’t really go anywhere else. Now you have greater opportunity to go out to different parts of the city. That is a testament to the underlying growth.”
Steven Hurwitz, a managing director with JLL’s agency leasing services, said Severino’s forecast is consistent with what he’s seeing in the South Florida office market. “There are so many positive indicators locally,” Hurwitz said. “I would forecast some more moderate growth, but not a major correction.”
Hurwitz also noted the influx of financial services companies relocating from Salt Tax states is creating a more sophisticated, resilient local economy.
“There is optimism,” he said. “There was not a lot of new office in the last five years, which pushed rates up and the vacancy rate down. Now we are in one of those cycles with a large amount of office and we have enough demand to fill it.”