On January 15, 2025, the Walker Webcast was broadcast live from Philadelphia and marked two significant milestones. This event was the 20th time that Willy Walker, President and CEO of Walker & Dunlop, had hosted economist and author Peter Linneman. Linneman is also the Principal and Founder of Linneman Associates.
During this webcast, they also celebrated the 25th anniversary of the Linneman Letter – a highly regarded economic newsletter. The discussion between Walker and Linneman covered various topics mentioned in the newsletter such as a review of events over the past quarter-century, current affairs, as well as predictions for 2025.
One topic that was discussed during this webcast was natural disasters – specifically,the ongoing Russia-Ukraine Warand recent Southern California wildfires. Despite their devastating effects,Linnemansuggestedthat these calamities have actually brought some benefits tothe U.S.economy.He explained that due to Ukraine’s cut-off from exports with Russia,the U.S.has become oneofthe world’s largest oiland gas producers,resulting in increased exports.Additionally,this situation has also ledto an increase in agriculturaland weapons systems exports.Linemann estimatedthatthese factors could potentially add up to60 basis points (bps)to GDP growth.
The conversation then shifted towards President-Elect Donald Trump’s proposed tariffs,and howthey may impact inflation which currently stands at2.9%.Linnenman assuredWalkerandthe audienceof two things.Firstly,it is likely that Trump will backtrack on someoftariffs he initially mentioned.Secondly,enacted tariffs are not expectedto significantly affect inflationas “we’re not a huge import country,” according to Linemann.Historical dataalso suggests little correlation between tariff increasesandinflation rates.Linenmannotedthat while there were tariff increases under bothTrump’s first administrationandafter Biden took office,inflation didnot directly resultfrom these actions.
The duo also discussed the relationship between interest rates and capitalization (cap) rates. Linneman predicted that cap rates would decrease to 5% within the next 12-24 months, leading to an increase in capital flow. He used an analogy of the ocean, where interest rates are like theseabedandcapital flowsare likened torain and wind.He explained that whileinterestrates may have some influence onthe seabed,it is ultimatelythe rainandwindthat determinesthe levelofwaterintheocean.Similarly,Linneman believes thatwhileinterestratesmay fluctuate,the fundamental factors such as demand for real estate will continue to drive investment decisions.
When asked about his predictions for2025,Linnemansuggestedthat GDP growth could range from2.7%to2.9%,dependingon developments in Ukraine.The S&P500is expectedto grow by7%-9%,with crude oil prices at $68-$70 per barrel.Linnenmanalso forecasteda100 bps dropintheEffective Federal Fund Rate.In terms of commercial real estate investments, he suggestedthat “stay rich” investors may focus on multifamily propertieswhile “get rich” investors might turn their attention towards office spaces.However,Linenmannotedpotential NOI problemsandinvestor reluctanceforofficeproperties,butbelievesthatthese issueswill resolve with time.Additionally,hementionedthata significant amountofinvestmentcould go towards data centersdue to a risk of overbuilding.”No matter how good the fundamentals seem,it can be overbuilt,”Linnenmanexplained.”We canoverbuild stuff even when there’s massive demand.”
For those who missed this webcast,a replay is available through various Walker Webcast channels including YouTube, Spotify,and Apple Podcasts.Subscribingto these channels will provide access tonew episodes every week featuring industry experts discussing current events and trends affecting commercial real estate.
In conclusion,the January 15 Walker Webcast was a significant event that marked two milestones – the 20th time Willy Walker hosted Peter Linneman and the 25th anniversary of the Linneman Letter. The discussion covered various topics including natural disasters, tariffs, interest rates,and predictions for2025. A replay of this webcast is available through Walker Webcast channels for those who missed it.
