AN OUTLOOK ON COMMERCIAL MARKETS IN 2020.

At the end of each year, CBRE releases an annual real estate outlook providing in-depth forecasts for the economy and each major commercial sector. A desire to understand where the economy is headed next year is perhaps of greater interest than usual, due to ongoing geopolitical issues, an upcoming presidential election and a very mature cycle (the longest in U.S. history). There is constant questioning of when the expansion will end and how geopolitics will affect markets, particularly as it relates to trade tensions between the U.S. and China. Though there is much to consider, CBRE's 2020 U.S. Outlook (1) predicts a good year for commercial real estate, and we expect the same in the local market.

ECONOMY

U.S. GDP growth will slow to between 1.5% and 2% in 2020, down from an average of 2.5% over the past five years.

U.S. GDP growth will slow notably next year as various issues create higher levels of uncertainly, including the ongoing U.S.-China trade conflict, slowing global growth and a presidential election. Barring any unforeseen risks, CBRE believes a recession will be avoided, thanks in large part to the stimulatory effects of the Fed's rate cuts in 2019. Slow growth will continue in 2020, broadly supporting already strong property market fundamentals.

From a local standpoint we expect things to mirror the national outlook; continued growth is expected in the state, albeit at a more moderate pace than recent years. Utah remains well-positioned going into 2020 with dynamics that will support consumption. Unemployment in the Salt Lake metro fell below 2% in October, which will support continued wage growth. Combined with favorable demographics, these factors should bode well for the state of Utah's economy next year.

CAPITAL MARKETS

Investment volume in 2020 should total between $478 billion and $502 billion, on par with the prior two years and one of the strongest years on record.

Amid slower economic growth, global uncertainty, and low interest rates, U.S. commercial real estate will remain a haven for investment in 2020. Greater investor caution and buyer-seller disconnects on pricing could moderately reduce volume from 2019 levels. Cap rates should be broadly stable, with slight compression for multifamily assets and slight increases for the other major sectors. Significant appreciation returns are not expected, but income returns will remain steady.

Within the state of Utah, sources of capital flowing into the state continue to...