Key highlights

  • Dwindling household savings, shrinking corporate margins, and tight credit conditions are creating expectations of a mild recession in mid-2024. But the path to a soft landing is widening.

  • Dovish monetary policy changes are usually seen as tailwinds for capital values, but there will still be sector and market polarisation.

  • Near-term US returns are still under pressure from market fundamentals and wide bid-ask spreads, but pressures should ease towards the end of 2024.

United States economic outlook


The economy entered 2024 on a seemingly solid footing, with the latest payroll data pointing to steady, if unspectacular, job gains. Consumer spending is ticking along nicely, and households are feeling a little less downbeat as inflation cools. We continue to think harder times lie ahead, though. Dwindling household savings, shrinking corporate margins, and tight credit conditions will weigh on growth over the first half of 2024, before a mild recession in the second half of 2024. But the path to a soft landing continues to widen, helped by a large and ongoing easing in financial conditions. 


Consumer price index inflation is running at uncomfortably high rates, particularly in the services sector. Indeed, over the past six months, core services inflation has risen 5% in annualised terms. However, these pressures look less acute in the Federal Reserve’s (Fed) preferred personal consumption expenditures inflation measures, and this pattern looks set to continue for December. We still think some aspects of inflation remain sticky and these might slow progress towards the Fed’s target in early-2024. However, the broad picture is that we have seen very significant progress in tackling the inflation surge in the US.


The Fed delivered a dovish policy pivot in December, removing its bias towards further tightening and starting the conversation around rate cuts. As inflation slows, the Fed is increasingly focusing on avoiding a hard landing, so we now expect the first cut in May rather than in June. Markets are pricing-in an even earlier start. We can’t rule out a cut in March, but we think that this would require a more marked deterioration in growth and inflation. Thereafter, the market expects around 150-175 basis points of easing over 2024, but we are pencilling-in even brisker easing as the economy struggles. 

United States economic outlook

North American real estate market overview 

We expect 2024 to be an interesting year. In the first half, we expect prices to fall 7-10% across sectors.

More price discovery is expected to occur, at least in the first half of the year, as elevated interest rates and a mild recession could lead to attractive prices for selected assets.

Secondary office assets have already seen sharp repricing because of rising vacancies. This is a result of hybrid working. We think that once interest rates begin to drop and inflation cools further, conversion or rehabilitation of underperforming offices will become more attractive and financially viable. We also expect to see more substantial state/local-government aid for these initiatives in 2024.

In the retail sector, weak supply for strip retail is proving positive, but consumers are expected to face headwinds this year. This leads us to be cautious on the near-term prospects.

Outlook for risk and performance 

We are bearish on US offices, as occupiers struggle to get employees back into the office. Weekly physical occupancy seems to have plateaued at around 50% nationally. Effective rental growth will be weak as sublease availabilities force direct landlords to entice occupiers with increasingly large concessions. We are even seeing an increase in subleases for buildings on their first leasing cycle. Recovery for the office markets will be a long and played-out affair. A large amount of inventory still needs to be withdrawn before we see an improvement in the supply/demand dynamics.

Established east-coast population hubs are proving positive for multifamily. Despite the large national volume of deliveries, supply in the east coast is expected to remain limited. Pockets of forced sales may come up on smaller properties in the east-coast and Sunbelt markets. These are likely to be for properties financed between 2020-2022. This could offer buying opportunities.

We like strip retail, lifestyle centres, and standalone retail, particularly grocery or discount-store-anchored properties in the Sunbelt and Midwest. These should benefit from higher population growth and the limited supply pipeline, but they will face headwinds as economic conditions deteriorate.

We are bullish about industrial and logistics markets surrounding the Gulf and east-coast ports. We think these ports should be primed to capture more shipping volumes as friend-shoring becomes more prominent. Recent infrastructure upgrades to the ports of Savannah and New Jersey should attract more shippers because of nearshoring/onshoring opportunities. Land-border traffic is expected to grow because of nearshoring. This is expected give a boost to markets with established intermodal terminals, such as Chicago and Dallas.

North American three- and five-year forecast returns