2Q2025 U.S. Economic and CRE Outlook

Our real estate equity and debt strategies are offered by BGO, a leading real estate asset manager with a more than 100-year history. BGO offers clients investment, lending, and property management services rooted in the global markets. 
 

Highlights

• Utilizing new methodologies
• Outlook generally positive
• Fundamentals stabilizing
• Capital markets turn cautious
• Focus on longer-term

As we have discussed numerous times recently, the economy and markets continue to deal with extremely elevated uncertainty. In our 2Q 2025 quarterly global economic outlook, we presented a few scenarios – base, upside, and downside – to address this uncertainty. We were planning on doing something identical for this US outlook, but we have taken a slightly different approach given the peculiarities of the challenge we face when projecting the US economy. The uncertainty, of course, centers on US trade policy which has the most direct and variable impacts on the US economy. And given that these policy decisions are largely geopolitical and highly unpredictable, it has made conventional forecasting even more challenging than usual. Therefore, we are employing a new approach this quarter. We still ran our macro scenario model, producing all of the cases as we usually do. But we also built a new machine-learning model based on principles of behavioral economics in order to ascertain the most likely path forward for US trade policy. Again, since these policy decisions aren’t really economic in nature, they call for a somewhat different approach to forecasting. We took the conclusions from the behavioral machine-learning model and then mapped those conclusions onto the most similar case from our scenario model. That is what we are using as our base case forecast this quarter, which we are calling the “augmented base case.” We can then, as per usual, discuss upside and downside scenarios relative to that scenario. Finally, in another deviation from the norm, which piggybacks off this analysis, within this report (versus its usual separate report), we are plotting the most likely course forward for the US commercial real estate market under such a novel framework.