GDP Shrinks for Second Consecutive Quarter but U.S. Not Yet in Recession

CBRE RESEARCH  |  JULY 28, 2022

Executive Summary

• U.S. GDP fell by 0.9% annualized in Q2 vs. consensus expectations of 0.3% growth. The drop was largely driven by decreases in consumer spending on goods and in business and residential investment.
   
• Although a second consecutive quarter of negative growth following a 1.6% drop in Q1 GDP is an indicator of recession, CBRE does not believe the U.S. economy is currently in one. However, we expect that a recession will take hold late this year and early next. The Federal Reserve raised the federal funds rate by 75 basis points (bps) yesterday to a target range of 2.25% to 2.5%.

CBRE Forecast
As economic growth slows, the Fed will struggle to balance its dual mandate of price stability and full employment. We expect the Fed will continue to favor price stability and take actions to reduce economic activity and job growth. Consequently, we expect the federal funds rate to reach a range of 3.25% to 3.5% by year-end and unemployment to begin to rise.

• Rapidly increasing interest rates and subdued economic growth will weigh on commercial real estate fundamentals and investment volumes this year and next. Segments of the multifamily, hotel and retail sectors that rely on budget-conscious consumers will be particularly affected.

Puget Sound Economic Update
 

CBRE RESEARCH

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JULY 2022

The Puget Sound region continued to generate more jobs through the second quarter despite macroeconomic headwinds, high inflation and declines in both consumer and manufacturer sentiment measures.  Unemployment fell further to 2.8%-- quite low by historical standards and lower than most peer metros.  Although mobility measures declined slightly from Q1 levels, total consumer spending remained well above pre-COVID levels at quarter-end. 

Consumer sentiment and savings rates continued to decline concurrently, leading many commentators to describe the quarter as one of a "conflicted consumer."  Despite the deceleration in the United States economy during the quarter, the Puget Sound region continued to show resilience relative to most metro areas.  
 

Explore the report

CBRE Secures $196.2M in Financing for Chapter Buildings Mixed-Use Development in Seattle’s University District (RE Business Online)
SEATTLE — CBRE has arranged joint-venture equity and $196.2 million in construction financing for Chapter Buildings I and II, two mixed-use buildings in Seattle’s University District. Seattle-based Touchstone, Atlanta-based Portman Holdings and Houston-based Lionstone Investments comprise the development team.
Tom Pehl, Charles Safley, Todd Tydlaska of CBRE Capital Markets West Coast, along with James Scott and Brian Myers of CBRE Capital Advisors, arranged the equity. Brad Zampa, Mike Walker and Megan Woodring of CBRE Debt & Structured Finance arranged the financing.
Article link:  https://rebusinessonline.com/cbre-secures-196-2m-in-financing-for-chapter-building-mixed-use-development-in-seattles-university-district/
 
Vulcan's new apartment project will 'feel like a Northwest national park' (PSBJ)
Vulcan Real Estate has begun construction of its largest and last multifamily project in Yesler Terrace, the company said Friday.
The two-tower Cascara project will rise at 225 Broadway, immediately south of Harborview Medical Center. It will have 345 residences, 174 parking stalls and storage for 272 bicycles.
A landscaped, meandering trail between the nine-story buildings will link Cascara to the expanding Yesler Terrace, the Seattle Housing Authority's World War II-era public housing project that's in the midst a massive redevelopment into a mixed-use, mixed-income community.
Article link: https://www.bizjournals.com/seattle/news/2022/07/29/vulcan-starts-building-two-tower-yesler-apartments.html
 
InCity Properties Acquires 98-Unit Apartment Building in Seattle’s Ravenna Neighborhood for $32.2MM (The Registry)
Multifamily investors have been staying busy this month, with the Puget Sound region reporting a significant number of transactions. In one sale that closed on July 26, the 98-unit Mod Apartments were sold for $32.3 million, or about $329,591 per unit. The buying entities in the transaction were Langer Properties LLC and Mod Apartment Investments LLC, both of which share an address with Seattle-based InCity Properties. The seller was a limited liability affiliated with Lynnwood-based SKS Trading Co, according to records filed with King County.
Article link: https://news.theregistryps.com/incity-properties-acquires-98-unit-apartment-building-in-seattles-ravenna-neighborhood-for-32-2mm%ef%bf%bc/
 
98 Ravenna units trade for over $32M (DJC)
SEATTLE — The Mod Apartments, at 6559 35th Ave. N.E., sold for a bit over $32.2 million, according to King County records.
The seller was SKS Courtyard II LLC, which is associated with local investors who acquired the property in 2017 for about $25.7 million.
Article link: https://www.djc.com/news/re/12150231.html
 
Affordable housing project at Yesler Terrace tops out (DJC)
Crews from Marpac Construction have topped out on a six-story affordable housing project at 1215 E. Fir St.
The development is a joint venture between Community Roots Housing and the Seattle Chinatown International District Public Development Authority. When complete, it will bring 158 units of affordable housing to Yesler Terrace.
Article link: https://www.djc.com/news/co/12150226.html
 
Inside the revived GameWorks Seattle arcade bar that opens this week (Geekwire)
Before its closure in late 2021, the GameWorks downtown arcade bar on 7th Ave. was a hallmark of Seattle’s nerd community. It’s now under new management, by old managers, and plans to reopen its doors on Aug. 2.
I had the chance to take a tour through the new GameWorks in advance of its opening day, with Darren Des Roches providing the tour.
Article link: https://www.geekwire.com/2022/inside-the-revived-gameworks-seattle-arcade-bar-that-opens-this-week/
 
Seattle was a millennial magnet, new study shows (Seattle Times)
Seattle was an “it” city for millennials in the 2010s — the huge influx of young adults was among our most notable demographic trends of the decade. Tens of thousands were drawn by the natural beauty, outdoors lifestyle, progressive politics and booming tech economy.
Now, a new study gives us a better sense of just how popular Seattle was among millennial movers, and also where those young people came from.
Article link: https://www.seattletimes.com/seattle-news/data/seattle-was-a-top-draw-for-millennials-heres-where-they-came-from/
 
Economic Recovery Initiative Seattle Restored to Activate 45 Vacant Commercial Properties Throughout City  (The Registry)
Seattle – The City of Seattle Office of Economic Development (OED) and Mayor Bruce Harrell announced the expansion of Seattle Restored—an economic recovery program that matches small business owners, artists and entrepreneurs with vacant commercial storefronts to host short-term pop-up shops and art installations. OED originally launched Seattle Restored in partnership with Seattle Good Business Network and Shunpike in December 2021 and focused on activating vacant commercial storefronts in Downtown Seattle neighborhoods such as Westlake, Belltown, Pioneer Square, and Chinatown-International District (CID) — prioritizing Black, Indigenous, and other business owners, entrepreneurs and artists of color.
Article link: https://news.theregistryps.com/economic-recovery-initiative-seattle-restored-to-activate-45-vacant-commercial-properties-throughout-city/
 
Teamsters reject latest offer from Seattle-area concrete companies (PSBJ)
Teamsters Local 174 said Tuesday that members again have voted overwhelmingly to reject the latest offer from concrete companies.
This is the first news about the strike since April, when 300-plus concrete mixer truck drivers in the Seattle area agreed to go back to work as negotiations continued with help from federal mediators.
It's a tenuous situation as the union could walk off the job again and cause another major shutdown of public and private construction projects. Before returning to work this spring, the nasty work stoppage lasted 145 days and idled other trades whose jobs depend on the delivery of concrete.
Article link: https://www.bizjournals.com/seattle/news/2022/08/02/teamsters-reject-latest-offer-seattle-concrete.html