On January 15, 2025, the Walker Webcast took place live in Philadelphia and marked two significant milestones. It was the 20th time that Willy Walker, President and CEO of Walker & Dunlop, had hosted economist and author Peter Linneman. The event also celebrated the 25th anniversary of Linneman’s well-respected economic newsletter called the “Linneman Letter.” During this webcast, both men discussed various topics mentioned in the newsletter such as a review of the past quarter century, current events happening now and their forecast for 2025.
One topic that was discussed during this webcast was natural disasters including specifically Russia-Ukraine War and more recently Southern California wildfires. Regarding Ukraine war situation,Linneman noted that while it has been horrific to witness these actions taking place,the scenario has actually benefitedthe U.S.economy.He explained,”The U.S.is currently leadingin oil productionand gas production globally.As Ukraineand Russia were cut off from exports,it resultedin an increaseof our ownexports.This alsoworkedfor agricultural productsand weapons systems exports.My calculations suggestthatthis contributedtoa growthof between20 to60 basis pointstothe GDP.”
In regards to California wildfires,Linnemannotedthatwhilethey continue torage on,”there is a possibilitythatthese tragic events may ultimately leadto positive changesforthe state.It will force peopleto reevaluatewhat went wrong,and hopefully take steps to prevent similar situationsfrom occurring again.”
Another topic covered byWalkerand Linnemanduring thiswebcastwas howPresident-ElectDonald Trump’s proposedtariffsmight impact inflationwhichis currently at2.9%.LinnenmanassuredbothWalkerandaswell asthe audience abouttwo things.Firstly,hementionedhowTrumpwill likelyback awayfrom someof his proposed tariffs.Secondly,in caseanytariifsare enacted,theimpacton inflationwould not be significantas the U.S.is not a major import country.He also pointed out that history hasshownthat tariffincreaseshave hadlittle effecton inflation.
The duoalso discussedthe relationship betweeninterest ratesand capitalization rates,with Linnemanpredictinga decreasein caprates to around 5% within the next12-24 months.This would result in an increasein capital flow.Usingan analogyofthe ocean,Linnemanexplainedhow interestratescan be comparedto theseabed,whilecapital flowsare like rain and wind.The seabed may have some influence on the amount of water,but ultimately it is factors such as rain and wind that determine its level.Likewise,the impact of interest rates on cap rates is minimal,and it’s other factors such as market demandthat truly drive changes in real estate values.
When asked about his predictions for2025,Linnemansaidhe expects GDP growth to be between2.7%and2.9%,dependingon what happens with Ukraine.He also forecasteda 7%-9%growthfor S&P500,and crude oil pricesaround $68-$70 per barrel.Additionally,hementioneda possible100 basis point dropin Effective Federal Fund Rate.
In terms of commercial real estate investments,Linnenmanbelieves multifamily propertieswill continue to attract “stay rich” money while office spacesmay appeal moreto those seekinghigher returns.However,he did expressconcernsabout NOI issuesand lackof investorinterestin office properties.But he believes these problems will eventually resolve themselves over time,resulting in a returnof investmentsto this sector.Finally,in regards to data centers,Linnenmansuggeststhatthey may become oversupplieddue torapid development.”No matter how strongdemandappears,it’s stillpossiblefor us tobuiltmore thanwe need,”hesaid.”This can leadtooverbuildingeven when thereis high demand.”
For those who missedthis insightfulwebcast,it is available for on-demand replaythrough the Walker Webcast channelson YouTube,Spotify and Apple.Subscribe to thesechannels to receiveinvitations,replaysand articlesfor upcoming episodes of the Walker Webcastevery week.
