"We expect U.S. GDP to expand by a historically strong 4.6 percent in 2022. All four quarters will see more than double the long-term trend of around 2 percent. The recently enacted Infrastructure Investment and Jobs Act—as well as the social spending proposals under consideration as of this writing—may add some upside potential to our 2022 growth forecasts, with greater impact in 2023 and beyond."

"Inflation reached multi-decade highs in the U.S. during 2021, largely due to strong economic growth, labor shortages and hobbled supply chains. All of this conspired to increase costs for products and services. We expect that price increases (as measured by Core PCE, the Federal Reserve’s preferred measure) will remain elevated during the first half of 2022, but will increase just 2.5 percent for the full year amid cooling economic growth and fewer supply chain constraints.
Headwinds to growth in China—the world's second largest economy—are a risk to growth in the U.S. and could impact the timing of monetary policy adjustments."

"Given the strong economic recovery and inflationary pressure, we expect the Fed will end its emergency quantitative easing—a key policy response to increase liquidity and improve market functioning during the pandemic—by mid-2022. This will set the stage for an increase in the federal funds rate, with the potential for more than one rate hike before year's end. However, we do not
foresee interest rates rising sharply enough to disrupt property markets, with the 10-year Treasury yield expected to reach 2.3 percent (from 1.4 percent in early December) by the end of 2022."

"Total investment volume in 2022 is projected to increase 5 percent to 10 percent over 2021 levels, which are on track to roughly equal pre-pandemic volumes from 2019 (currently the highest annual total on record). Although industrial and multifamily assets will likely continue to capture the most investor interest given the tailwinds of e-commerce and demographic shifts, investment in office and retail assets should also pick up. Industrial and multifamily volumes are projected to increase 10 percent to 15 percent over 2021 levels, while office and retail volumes will rise 5 percent to10 percent. Meanwhile, hotel volume in the first three quarters of 2021 recovered to pre-pandemic levels, a positive sign for the sector heading into 2022."

"The all-property average cap rate is expected to be 280-300 basis points (bps) higher than the 10-year Treasury yield during the first half of 2022, on par with the 290-bp average from 2013 to 2018, before narrowing to 250 bps in H2 2022. In addition, rents should continue rising, supporting higher property net operating income (NOI) for most asset types. Although cap rates typically follow the direction of real interest rates in the long run, NOI expectations are more influential in the short term."

"U.S. office market activity strengthened in the second half of 2021, and the momentum likely will continue in 2022. Although the outlook depends on how new COVID variants impact society, effective medical advancements will make occupiers more comfortable with making long-term leasing decisions. At the same time, however, occupiers are still determining how best to support hybrid work and how it will impact their portfolio strategies. Although demand will be greater in 2022, the U.S. office market will contend with the highest vacancy in nearly three decades and lower rental rates until the second half of the year."

"The life sciences sector will continue growing in key U.S. office markets throughout 2022, fueled by advances in biotechnology and record levels of venture capital and other sources of funding. This is resulting in the largest pipeline of life sciences laboratory construction on record, with 23.6 million sq.
ft. underway in the nation’s top 12 life sciences clusters as of Q3 2021. Average lab rents are at record highs in the premier life sciences clusters of Boston-Cambridge, the San Francisco Bay Area and San Diego. Life sciences’ growing labor pool and new development activity continues to spread to emerging hubs such as Pittsburgh, Houston and Salt Lake City, among many others."

"Since 2010, sales per sq. ft. of U.S. retail space have been on the rise. From 2010 to 2020, retail sales grew 42 percent, while retail supply grew just 4 percent. The pandemic forced a temporary pause in this trend, but year-to-date activity in 2021 shows that retailers are using space more efficiently than ever. Consumer spending is forecast to rise in 2022, as a build-up of personal savings
during the pandemic is released. The revival of inbound international travel, responsible for more than $150 billion in expenditures annually according to a 2019 U.S. Travel Association report, will provide an additional boost to retail in coastal and other tourism-focused markets."

"2021 has been a record year for venture capital investment in companies supporting the retail trade. Technology that drives e-commerce—logistics and supply chain management, in particular—is especially attractive. Investment activity is also high for mobile payment applications. Also known as m-commerce, this conduit of retail trade has been growing as a segment of total retail, with an estimated $295 billion in U.S. retail sales in 2021 and up to $660 billion in annual sales by 2025 when it will account for over 10% of total retail sales, according to eMarketer. Venture capital is also seeking investments in location analytics, enterprise software, artificial intelligence and machine learning. Funding this growing technology could help ease the stress on the supply chain, which remains an issue as the nation emerges from the pandemic."

"3PLs led industrial leasing activity in 2021 with a market share of 30 percent, compared with 13 percent  for e-commerce. 3PLs will expand further in 2022 as companies look to reduce direct logistics costs and avoid the hassle of finding space in record tight markets with limited labor availability. As a result, 3PLs’ market share will increase in most U.S. markets as vacancy rates decline, rents increase and labor markets further tighten, leading to a projected leasing market share of 35 percent by year’s end. Notwithstanding, 3PLs will need to overcome labor shortages, leading to the greater use of automation and other technologies to lower the reliance on human labor."

"Robust investor appetite for industrial assets will push up prices and further compress cap rates across markets and product types in 2022. The cap rate spread between primary and secondary markets will continue to narrow in 2022. Phoenix and Las Vegas will post cap rates in line with the Inland Empire, Indianapolis and Columbus cap rates will drop to Chicago levels, and prices in the PA I-78/81 Corridor will come close to those in the New Jersey markets. We also expect Northern and Central Florida cap rates to approach those of South Florida in the coming year. With institutional capital flowing into the market, it will remain difficult for new investors to find Class A space to purchase. As a result, we expect more capital to target Class B facilities, lowering cap rates for this product type."

"Downtown multifamily properties are filling back up and occupancy rates are nearing pre-pandemic levels, spurred by a confluence of factors: fewer restrictions on urban amenities, higher vaccination rates, a growing willingness to use public transit, the reopening of college campuses and more workers returning to the office."

"Urban areas saw an average vacancy rate increase of nearly 200 bps during the peak of the pandemic. As of Q3 2021, urban vacancy rates average 5 percent, just 70 bps above their pre-crisis level, and are expected to fall to 4 percent by the end of 2022. By contrast, suburban properties fared better, as both secular and cyclical factors—income uncertainty, a preference for outdoor options, a need for more space and more millennials with growing families requiring schools—drove demand for apartments in lower-density and lower-cost submarkets."

"We predict U.S. multifamily investment volume will reach a record of nearly $213 billion in 2021 (year-to-date volume totaled $179 billion through Q3 2021), well above 2019’s level of $193 billion. For 2022, we expect at least a 10 percent increase from 2021 to $234 billion. While capital continues to flow from both domestic and foreign sources, the targets seem to be shifting. Investors find strong non-coastal markets more acceptable than ever and there is also a growing trend toward favoring ESG-compliant assets, especially from European investors."

"Business travel and group demand are constrained by corporate travel budgets and policies, which took a hit as the delta variant swept the U.S. in late summer 2021. The omicron variant will impact business travel, particularly during the first half of 2022."

"However, the easing of inbound international travel restrictions will catalyze hard-hit global gateway cities in the U.S. and aid the recovery over the course of 2022. As recently as August 2021, international travel was down nearly 78% relative to 2019."

"For 2022, we expect inbound travel, led by leisure travelers from Europe and Asia-Pacific, to drive increased hotel demand."

"Resorts and all-inclusive destinations will continue to be strong performers in 2022 as travelers seek simplicity and price certainty. Already operating at 13 percent above 2019’s summer RevPAR, Miami has benefited from the shift in travel patterns, and thus may end up with less growth. Harder-hit markets like San Francisco and New York, with RevPAR still down 61 percent and 56 percent, respectively, compared with 2019, may benefit more in 2022. Overall, supply growth will continue to moderate given increased construction costs and labor shortages."

"The benefits will not be uniform. Resorts and all-inclusive destinations will continue to be strong performers in 2022 as travelers seek simplicity and price certainty. Already operating at 13 percent above 2019’s summer RevPAR, Miami has benefited from the shift in travel patterns, and thus may end up with less growth. Harder-hit markets like San Francisco and New York, with RevPAR still down 61 percent and 56 percent, respectively, compared with 2019, may benefit more in 2022. Overall,
supply growth will continue to moderate given increased construction costs and labor shortages."

"Data centers are becoming an ever more important and larger commercial real estate asset class as businesses expand their digital infrastructure. With emerging technologies like 5G, AI and edge computing adding to already high demand for data centers, development will increase in 2022, spurring growth in established primary markets, as well as secondary and tertiary markets. Since 2016, wholesale colocation inventory in primary markets (Northern Virginia, Silicon Valley, Chicago, New York Tri-State, Dallas, Phoenix and Atlanta) has more than doubled to 3.08 gigawatts (GW). With 527.6 megawatts (MW) under construction in primary markets—an increase of nearly 350 MW from 2016—
the accelerated growth of the data center sector will continue in 2022."

"On average, pricing continues to decline across both primary and secondary markets, largely due to more competition as new data centers come online. Some lower-vacancy markets, as well as markets facing potential supply bottlenecks, are beginning to see prices flatten out or, in some instances, tick up. We anticipate this trend to continue in 2022, with space availability and power having the largest impact on asking rates. High-quality, highly connected assets such as carrier hotels will continue to command a premium for both new and existing tenants."