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DARIN MELLOTTDirector of Research, AmericasCBRE Research
GLOBAL ECONOMIC AND REAL ESTATE OUTLOOK.
IS THIS REAL LIFE?
7 MAY 2020
COVID-19 HAS DERAILED THE ECONOMIC CYCLEMajor epidemic events and the U.S. economic cycle
Source: BLS, Wikipedia, CBRE Research, April 2020.
Zika virus epidemicPlague Epidemic in India
Malaysia Nipah Virus Outbreak
SARS Outbreak in China and Hong Kong
Dengue Outbreak in Singapore
Dengue Outbreak in India and Pakistan
Zimbabwean Cholera Outbreak
West African Meningitis Outbreak
Swine Flu
Haiti Cholera Outbreak
Yellow Fever Outbreak in Sudan
Middle East Respiratory Syndrome Coronavirus
Western African Ebola Virus Epidemic
Kivu Ebola Epidemic
Measles Outbreak in Congo and Samoa
COVID-19 Outbreak Started
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
199
0
199
1
199
2
199
3
199
4
199
5
199
6
199
7
199
8
199
9
200
0
200
1
200
2
200
3
200
4
200
5
200
6
200
7
200
8
200
9
201
0
201
1
201
2
201
3
201
4
201
5
201
6
201
7
201
8
201
9
202
0
US Unemployment (%)
A TRUE GLOBAL SHOCKGlobal map of confirmed COVID-19 cases
REGION CONFIRMEDUnited States 1,175,782
Brazil 105,222
Canada 61,813
Spain 247,122
Italy 211,938
United Kingdom 191,453
France 168,693
Germany 165,914
Russia 145,268
Iran 98,647
Mainland China 82,884
India 46,437
Source: WHO, CDC, Johns Hopkins University, COVID19info.live, CBRE Research, 4 May 2020.
WITH LOCKDOWN THE ONLY OPTIONOutbreak development by country
Source: COVID19info.live, Macrobond, Oxford Economics, CBRE Research, 7 May 2020.
Country Lockdown Period Days Since Lockdown % of Total CasesInfected % of Total
Population
Spain Mar 14 – Present 52 7% 0.529%
United States Mar 19 – Present 47 33% 0.354%
Italy Feb 21 – Present 74 6% 0.350%
United Kingdom Mar 23 – Present 43 5% 0.282%
France Mar 17 – Present 49 5% 0.259%
Germany Mar 22 – Present 44 5% 0.198%
Russia Mar 30 – Present 36 4% 0.100%
Brazil Mar 24 – Present 44 3% 0.048%
China Jan 23 – Apr 07 76 3% 0.006%
THE CURVE IS ALMOST BENT IN THE DEVELOPED WORLD Cumulative number of confirmed cases, by number of days since 100th case
Source: Financial Times, CBRE Research, European Centre for Disease Prevention, Macrobond, 4 May 2020.
USA
Italy
China
Japan
South Korea
France
100
1,000
10,000
100,000
1,000,000
0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95 100 104
Num
ber
of C
ase
s
…EVERY 2 DAYS
…EVERY 3 DAYS
…EVERY WEEK
Days Since 100 Cases
SpainGermany
U.K.
CASES DOUBLE EVERY DAY
World
BUT IT HAS FURTHER TO GO IN THE DEVELOPING WORLDCumulative number of confirmed cases, by number of days since 100th case
Source: Financial Times, CBRE Research, European Centre for Disease Prevention, Macrobond, 4 May 2020.
India
Iran
ChinaBrazil
Algeria
100
1,000
10,000
100,000
1,000,000
0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95 100
Num
ber
of C
ase
s
…EVERY 2 DAYS
…EVERY 3 DAYS
…EVERY WEEK
Days Since 100 Cases
Turkey
Indonesia
Mexico
CASES DOUBLE EVERY DAY
World
WE ARE OVER THE PEAK IN FATALITIESDaily new deaths, by number of days since 3 daily deaths
Source: Financial Times, CBRE Research, European Centre for Disease Prevention, Macrobond, 7 May 2020.Note: Number reported as a 7-day moving average.
Days Since Third Death
United States
ChinaSouth Korea
ItalySpainGermany
UK
France
Japan
1
10
100
1,000
0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95
Num
ber
of D
eath
s
AND COUNTRIES BEGAN TO MOVE OUT OF FULL LOCKDOWNGDP-lead indicator and lockdown stage comparison (May 4)
SEMI-EASING LOCKDOWN GRADUAL OPENING RECOVERYLOCKDOWN
China
France Netherlands
USASpain
Australia
Austria DenmarkCzechNorway
Iran
Germany ItalyPortugalBelgiumSwitzerlandCanadaIndia
NO LOCKDOWN
• South Korea• Taiwan• Japan
Source: CBRE Research, 4 May 2020.
UKTurkey
Singapore
BrazilRussia
ECONOMY
VOLATILITY IS NOT OVER YETEquity market indexes (1/1/2020 = 100)
Source: S&P, FTSE, Deutsche Boerse, Nikkei, Shanghai Stock Exchange, Macrobond, CBRE Research, 7 May 2020.
60
65
70
75
80
85
90
95
100
105
110
Index
S&P 500 FTSE 100 Nikkei 225 Shanghai SE DAX 30
REIT PRICES HAVE RECOVERED SOONER THAN IN GFC U.S. REIT Index
Source: Wilshire Associates Incorporated, CBRE Research, 4 May 2020.
0
50
100
150
200
250
300
350
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
20
18
20
19
20
20
20
30
40
50
60
70
80
90
100
110
120
1/2 1/9 1/16 1/23 1/30 2/6 2/13 2/20 2/27 3/5 3/12 3/19 3/26 4/2 4/9 4/16 4/23 4/30
Industrial
Self Storage
Apartments
Office
Health Care
Strip Centers
Hotels
Retail
Malls
INDUSTRIAL RESILIENT; RETAIL AND HOTEL STRUGGLING U.S. REIT Index by sectors
Source: Wilshire Associates Incorporated, CBRE Research, 23 April 2020.
BUSINESS CONFIDENCE SINKS – PARTICULARLY SERVICESGlobal market business confidence index
35
40
45
50
55
60
Mar-17 Sep-17 Mar-18 Sep-18 Mar-19 Sep-19 Mar-20
Index
>50
= E
xpansi
on
Global
Composite Manufacturing Services
25
30
35
40
45
50
55
60
Apr-17 Oct-17 Apr-18 Oct-18 Apr-19 Oct-19 Apr-20
U.S.
Composite Manufacturing Services
Source: Markit Business Survey, Macrobond, CBRE Research, April 2020.
Source: EIA, ICE, CBRE Research, May 2020.
DEMAND SLUMP AND OVER-SUPPLY HAVE DEPRESSED OIL U.S. oil production and ICE brent oil price
0
20
40
60
80
100
120
140
4
6
8
10
12
14
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
USD
/Barr
el
Barr
els/
Day,
Mill
ions
U.S. Crude Oil Production (lhs) Cushing OK WTI Spot Price (rhs) Crude Oil ICE Brent Spot Price (rhs)
Q4
AMERICAN CONSUMER CONFIDENCE SLUMPSU.S. consumer sentiment index [monthly]
Source: University of Michigan, CBRE Research, April 2020.
-28
-34-26
-40
-30
-20
-10
0
10
20
30
40
Y-o
-Y C
hange
(%)
Key drivers of consumer sentiment:
+ Prime-Age Worker Wage Growth
− Unemployment Rate
− CPI Inflation
+ Stock Market Growth
Source: CBRE Research, Oxford Economics, April 2020.
RETAIL FELL THE MOST ON RECORD IN MARCHU.S. retail and food services sales y-o-y growth (excl. auto and gas)
-6
-4
-2
0
2
4
6
8
10
(%)
EUROPEAN CONSUMER CONFIDENCE DOWN; RETAIL ALSO WEAKEuropean consumer sentiment index [monthly]
Source: European Commission, CBRE Research, April 2020.
-25
-20
-15
-10
-5
0
Bala
nce
s (%
)
EU Euro Area
Largest falls in March:
- Germany
- Netherlands
- France
- Italy
COVID-19 WILL HAVE A PERMANENT IMPACT ON GLOBAL GDPGlobal real GDP index (Q4 2019 = 100)
Source: CBRE House-View, Oxford Economics, April 2020.
90
92
94
96
98
100
102
104
106
108
110
2019 2020 2021 2022
Q4 2
019
= 1
00
January GDP Forecast April GDP Forecast
8.1%
1.2%
COVID-19 IMPACT ON THE G7 ECONOMIES IN 20202020 annual GDP growth forecast (April)
Source: CBRE House-View, April 2020.
-4.9 -4.8 -4.7-5.4
-6.1
-8.1
-6.8
-10.0
-8.0
-6.0
-4.0
-2.0
0.0
2.0
4.0
USA Japan Germany UK France Italy Canada
Rea
l G
DP G
row
th (%
)
Pre-COVID19 Forecast Revised Forecast
EXPECTED REBOUND IN 20212021 annual GDP growth forecast (April)
Source: CBRE House-View, April 2020.
6.1
3.9
5.2 5.0
6.2
4.4
9.5
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
9.0
10.0
USA Japan Germany France UK Italy Canada
Rea
l G
DP G
row
th (%
)
Pre-COVID19 Forecast Revised Forecast
Source: BEA, Oxford Economics, CBRE Research, April 2020.
ASSUMED ECONOMIC IMPACT BY INDUSTRY U.S. annualized q-o-q GDP growth in Q2 2020 (%)
-100 -80 -60 -40 -20 0 20 40 60 80
Health care and social assistanceFederal government
State and local governmentAgriculture, forestry, fishing and hunting
InformationFinance and insurance
Management of companies and enterprisesProfessional, scientific, and technical services
Administrative and waste servicesMiningUtilities
Other services, except public administrationTotal GDP
Real estate and rental and leasingConstruction
ManufacturingTransportation and warehousing
Educational servicesRetail trade
Wholesale tradeArts, entertainment, and recreationAccommodation and food services
Annualized q-o-q GDP growth in Q2 2020 (%)
Source: CBRE Research, Oxford Economics, April 2020.
ASSUMED EMPLOYMENT IMPACT BY INDUSTRYU.S. employment change in Q2 2020
-7 -6 -5 -4 -3 -2 -1 0 1 2
Health care and social assistanceState and local government
Federal governmentMining
InformationManagement of companies and enterprises
Finance and insuranceReal estate and rental and leasing
Professional, scientific, and technical servicesAdministrative and waste services
Other services, except public administrationUtilities, transportation and warehousing
Educational servicesManufacturing
Wholesale tradeConstruction
Arts, entertainment, and recreationRetail trade
Accommodation and food services
Millions of Job Loss in Q2 from Q1
QUARTERLY ANNUALIZED PROFILE OF GROWTH2020 annualized q-o-q GDP growth forecast by CBRE House-View
Source: CBRE House-View, April 2020.
-5.1
-36.2
29.0
10.5
-6.6
-39.9
42.9
14.7
-0.8
-41.3
1.9
46.0
-50
-40
-30
-20
-10
0
10
20
30
40
50
60
2020Q1
2020Q2
2020Q3
2020Q4
2020Q1
2020Q2
2020Q3
2020Q4
2020Q1
2020Q2
2020Q3
2020Q4
Rea
l G
DP G
row
th (SS
AR,
%)
Pre-COVID19 Forecast Revised Forecast
United States United Kingdom Canada
U.S. UNEMPLOYMENT RATE
Source: BLS, CBRE Research, April 2020.
0
2
4
6
8
10
12
14
1620
00
Q1
20
00
Q3
20
01
Q1
20
01
Q3
20
02
Q1
20
02
Q3
20
03
Q1
20
03
Q3
20
04
Q1
20
04
Q3
20
05
Q1
20
05
Q3
20
06
Q1
20
06
Q3
20
07
Q1
20
07
Q3
20
08
Q1
20
08
Q3
20
09
Q1
20
09
Q3
20
10
Q1
20
10
Q3
20
11
Q1
20
11
Q3
20
12
Q1
20
12
Q3
20
13
Q1
20
13
Q3
20
14
Q1
20
14
Q3
20
15
Q1
20
15
Q3
20
16
Q1
20
16
Q3
20
17
Q1
20
17
Q3
20
18
Q1
20
18
Q3
20
19
Q1
20
19
Q3
20
20
Q1
20
20
Q3
20
21
Q1
20
21
Q3
20
22
Q1
20
22
Q3
20
23
Q1
20
23
Q3
Unem
plo
ymen
t Rate
(%
)
Forecast
BUT UNEMPLOYMENT RAPIDLY UP AND RAPIDLY DOWNPercent change in U.S. unemployment rate during recessions (t=quarter prior to recession)
Source: CBRE House-View, BLS, Bloomberg News, April 2020.
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
t t+2 t+4 t+6 t+8 t+10 t+12 t+14 t+16 t+18 t+20
Unem
plo
ymen
t Rate
Change
(%)
July 1981
July 1990
March 2001
December 2007
March 2020
UNEMPLOYMENT IS HIGHLY CORRELATED WITH VACANCYU.S. unemployment rate and all-property vacancy rate
Source: CBRE Econometric Advisors, CBRE House-View, April 2020.
2
4
6
8
10
12
14
16
198
9Q
1
199
0Q
1
199
1Q
1
199
2Q
1
199
3Q
1
199
4Q
1
199
5Q
1
199
6Q
1
199
7Q
1
199
8Q
1
199
9Q
1
200
0Q
1
200
1Q
1
200
2Q
1
200
3Q
1
200
4Q
1
200
5Q
1
200
6Q
1
200
7Q
1
200
8Q
1
200
9Q
1
201
0Q
1
201
1Q
1
201
2Q
1
201
3Q
1
201
4Q
1
201
5Q
1
201
6Q
1
201
7Q
1
201
8Q
1
201
9Q
1
202
0Q
1
202
1Q
1
(%) Unemployment Rate All-Property Vacancy Rate
Forecast unemployment and approximate implied vacancy
VACANCY INCREASE WILL VARY BY SECTORVacancy rates for major property types in the U.S.
Source: CBRE Econometric Advisors, Q1 2020.
0
5
10
15
20
25
(%) Office Industrial Retail Apartment 4 per. Mov. Avg. (Apartment)
Forecast
FED IS WORKING VERY HARD BEHIND THE SCENESTotal of federal reserve banks, by asset type, US $trillion
Source: Federal Reserve, CBRE Research, 17 April 2020.
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
US
$Tr
illio
ns
Treasury Security Holdings Agency MBS Holdings Agency Debt Holdings
COVID-19 Impact
SO YIELD SPREADS START TO COMPRESSU.S. A-rated corporate bond yield spread over 10-year treasury
Source: Macrobond, CBRE Research, 4 May 2020.
0
100
200
300
400
500
600
0
2
4
6
8
10
12
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
(Bps)(%)A-rated Corporate Bond Yield 10-Year Treasury Yield Spread (rhs)
SO YIELD SPREADS START TO COMPRESSU.S. BBB-rated corporate bond yield spread over 10-year treasury
Source: Macrobond, CBRE Research, 4 May 2020.
100
200
300
400
500
600
700
800
0
2
4
6
8
10
12
14
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
(Bps)(%)BBB-rated Corporate Bond Yield 10-Year Treasury Yield Spread (rhs)
FINANCIAL MARKET STRESS HAS EASED SIGNIFICANTLY St. Louis Fed Financial Stress Index (0=normal)
Source: FRED, CBRE Research, April 2020.
-2
0
2
4
6
8
10
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Fin
anci
al St
ress
Index
HOUSEHOLDS LESS LEVERAGED THAN PRIOR TO GFCHousehold debt-service ratio compared to household debt % of GDP
Source: BIS, CBRE Research, Q4 2019.
60
65
70
75
80
85
7.0
7.5
8.0
8.5
9.0
9.5
10.0
10.5
11.0
11.5
12.0
20
01
Q3
20
02
Q1
20
02
Q3
20
03
Q1
20
03
Q3
20
04
Q1
20
04
Q3
20
05
Q1
20
05
Q3
20
06
Q1
20
06
Q3
20
07
Q1
20
07
Q3
20
08
Q1
20
08
Q3
20
09
Q1
20
09
Q3
20
10
Q1
20
10
Q3
20
11
Q1
20
11
Q3
20
12
Q1
20
12
Q3
20
13
Q1
20
13
Q3
20
14
Q1
20
14
Q3
20
15
Q1
20
15
Q3
20
16
Q1
20
16
Q3
20
17
Q1
20
17
Q3
20
18
Q1
20
18
Q3
20
19
Q1
20
19
Q3
US Household Debt-Service Ratio
Advanced Economies, Household Debt % of GDP (2Y-Moving Average, rhs)
SHARP INCREASE IN THE VALUE OF DOLLARDollar value index (1/1/2015=100)
Source: Federal Reserve, FRED, Macrobond, CBRE Research, April 2020.
-5
0
5
10
15
20
25
30
35
95
100
105
110
115
120
125
130
135
Jan 2015 Jul 2015 Jan 2016 Jul 2016 Jan 2017 Jul 2017 Jan 2018 Jul 2018 Jan 2019 Jul 2019 Jan 2020
Dolla
r in
dex
(1/1
/20
15
=100
)
Spread (rhs) Trade-Weighted Dollar Index (lhs) Emerging Market Economies Dollar Index (lhs)
EMERGING MARKETS DEBT A POSSIBLE PROBLEMCore debt as percent of Emerging Markets GDP
Source: BIS, CBRE Research, Q4 2019.
0
20
40
60
80
100
120
140
160
180
200
20
08
Q1
20
08
Q3
20
09
Q1
20
09
Q3
20
10
Q1
20
10
Q3
20
11
Q1
20
11
Q3
20
12
Q1
20
12
Q3
20
13
Q1
20
13
Q3
20
14
Q1
20
14
Q3
20
15
Q1
20
15
Q3
20
16
Q1
20
16
Q3
20
17
Q1
20
17
Q3
20
18
Q1
20
18
Q3
20
19
Q1
20
19
Q3
Government Households Non-Financial Corporates
POLICY
COUNTRIES TURN TO FISCAL STIMULUS – MORE ON THE WAYFiscal stimulus packages in US$ Billions and Percent of GDP
Source: CBRE Research, Oxford Economics, April 2020.
10
33
22
5
14 14 16
39
14
5 210
10
20
40
60
80
100
0
500
1,000
1,500
2,000
2,500
(%)
US$
Bill
ions
Proposed Additional (lhs) Total % of GDP (rhs)
-1
0
1
2
3
4
5
6
7
8
US Canada EU UK Japan China US Canada EU UK Japan China
Pre-Crisis Post-Crisis Current
2007-08 Financial Crisis COVID-19
INTEREST RATES DOWN – BUT NOT HIGH TO START WITHCentral bank policy rate cuts
Source: CBRE Research, Macrobond, April 2020.
HONG KONG LEADS IN RECOVERYPercentage of city moving compared to usual on May 3
Source: Citymapper, CBRE Research, May 2020.
0 10 20 30 40 50 60
Washington DCMilan
New YorkRome
San FranciscoMadrid
ParisAmsterdam
PhiladelphiaBostonTokyo
ChicagoLondon
Los AngelesMexico City
SeoulMoscowSydneyBerlin
TorontoSingapore
SeattleHong Kong
100 = normal
May-3
Apr-19
GREEN SHOOTS
CHINA – SOCIAL FINANCING REBOUNDSTotal social financing (y-o-y growth)
Source: People’s Bank of China, CBRE Research, April 2020.
10.4%
10.7%
11.0%
11.3%
11.6%
Jan-19 Mar-19 May-19 Jul-19 Sep-19 Nov-19 Jan-20 Mar-20
Last two-year average
CHINA – TRADE SLOWLY RESUMINGChina container freight rate, composite (y-o-y)
Source: People’s Bank of China, CBRE Research, April 2020.
-8%
-4%
0%
4%
8%
12%
Jan-19 Apr-19 Jul-19 Oct-19 Jan-20
Last two-year average
DINING SERVICES – NO GREEN SHOOTS IN THE DEVELOPED WORLD YETY-o-Y change in OpenTable restaurant booking
Source: OpenTable, 3 May 2020.
-100
-80
-60
-40
-20
0
20
2/18 2/23 2/28 3/4 3/9 3/14 3/19 3/24 3/29 4/3 4/8 4/13 4/18 4/23 4/28 5/3
Y-o
-Y C
hange
(%)
United Kingdom Australia United States
U.S. TRAVEL STILL SEVERELY DEPRESSED TSA checkpoint travel numbers for 2020 and 2019
Source: TSA, 4 May 2020.
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3/1 3/8 3/15 3/22 3/29 4/5 4/12 4/19 4/26 5/3
Mill
ions
2020 2019 Weekly Mov. Ave. (2019)
TURNING TO REAL ESTATE
Source: CBRE Research, RCA (Americas), Q1 2020.
Q1 INVESTMENT VOLUME SURPRISED ON THE UPSIDEGlobal CRE sales transaction volume (into US$ using fixed exchange rate)
0
200
400
600
800
1,000
1,200
0
50
100
150
200
250
300
350
Q1
20
10
Q2
20
10
Q3
20
10
Q4
20
10
Q1
20
11
Q2
20
11
Q3
20
11
Q4
20
11
Q1
20
12
Q2
20
12
Q3
20
12
Q4
20
12
Q1
20
13
Q2
20
13
Q3
20
13
Q4
20
13
Q1
20
14
Q2
20
14
Q3
20
14
Q4
20
14
Q1
20
15
Q2
20
15
Q3
20
15
Q4
20
15
Q1
20
16
Q2
20
16
Q3
20
16
Q4
20
16
Q1
20
17
Q2
20
17
Q3
20
17
Q4
20
17
Q1
20
18
Q2
20
18
Q3
20
18
Q4
20
18
Q1
20
19
Q2
20
19
Q3
20
19
Q4
20
19
Q1
20
20
US$
Bill
ions
US$
Bill
ions
Americas (L) EMEA (L) APAC (L) 4-QTR Moving Total (R)
Source: CBRE Research, RCA (Americas), Q1 2020.
BUT VOLUMES SLOWED IN MARCH Monthly investment volume index (January=100)
20
40
60
80
100
120
140
January February March
Inve
stm
ent V
olu
me
Index
(Ja
nuary
=100
)
EMEA (2020)
EMEA (5-Year Ave.)
20
40
60
80
100
120
140
January February March
Americas (2020)
Americas (5-Year Ave.)
20
40
60
80
100
120
140
January February March
APAC (2020)
APAC (5-Year Ave.)
CHINA – TRANSACTIONS RESUMED IN APRILTotal building size sold in real estate transactions by city [weekly]
Source: SouFun-CREIS, Macrobond, CBRE Research, April 2020.
0.0
0.2
0.4
0.6
0.8
1.0
1.2
Mill
ion S
qm
Beijing Shanghai Shenzhen Wuhan
GLOBAL RENT AND CAPITAL VALUE LIKELY TO FALL Global GDP, rent and capital value indices (t=Q4 2019)
Source: CBRE House-View, Oxford Economics, April 2020.
75
80
85
90
95
100
105
110
115
120
t-4 t t+4 t+8 t+12 t+14
Index
April GDP Forecast
January GDP Forecast
Global All-Property Rent(COVID-19)
Global All-Property CV(COVID-19)
BUT NOT FOR AS LONG AS IN THE GREAT FINANCIAL CRISISGlobal GDP, rent and capital value indices (t=Q3 2008)
Source: CBRE House-View, Oxford Economics, April 2020.
75
80
85
90
95
100
105
110
115
t-4 t t+4 t+8 t+12
Index
GDP Great FinancialCrisis (GFC)
Pre-GFC GDPforecast (Jan 2008)
Global All-PropertyRent (GFC)
Global All-PropertyCapital Value (GFC)
BUT CAP RATES LIKELY TO INCREASE IN THE SHORT TERMCapitalization rates for major property types in the U.S.
Source: CBRE Econometric Advisors, Q1 2020.
3
4
5
6
7
8
9
10
11
12
13
(%) Office Retail Industrial Apartment Hotel
Awaiting sector-specific forecast
THOUGHTS FROM ANOTHER WORLD THAT ARE STILL
RELEVANT…
Median Incomes 2007 vs. 2017
0
20,000
40,000
60,000
80,000
Less than high schoolgraduate
High school graduate(includes equivalency)
Some college orassociate's degree
Bachelor's degree Graduate or professionaldegree
2007 - Adjusted for Inflation 2017Median Annual Earnings in U.S. by Education Level ($)
Source: U.S. Census Bureau.
MEDIAN INCOME BY EDUCATION
0
0.500
1.000
1.500
03:Q
1
06:Q
2
09:Q
3
12:Q
4
16:Q
1
Student Loan
Debt Comparison
0
2.000
4.000
6.000
8.000
10.000
03:Q
1
05:Q
4
08:Q
3
11:Q
2
14:Q
1
16:Q
4
Mortgage
0
0.200
0.400
0.600
0.800
1.000
03:Q
1
05:Q
4
08:Q
3
11:Q
2
14:Q
1
16:Q
4
Credit Card
ONE OF THESE IS NOT LIKE THE OTHERS
Source: Federal Reserve Bank of New York.
Millennials are 34%less wealthy than
previous generations at their age
Typical family headed by class of 80s was the only
cohort to lose ground 10’ – 16’
Time &
Education
Will they catch up?
BROAD IMPLICATIONS FOR SOCIETY
Source: Federal Reserve Bank of St. Louis.
GEN X VS. MILLENNIALS2001 VS. 2016
Source: National Association of Realtors
• House prices up 47%
• Wages are up 16%
Housing costs exceed income gains in 1/3 of the 100 largest metros.
INCOMES VS HOUSE PRICES
75%of millennials are renting due to
financial reasons
51%of Americans have made housing or spending choices to afford monthly
housing payment
A FEW QUICK FACTS ABOUT HOUSING AFFORDABILITY
Source: Freddie Mac.
Below Average Above Average
METRO HOMEOWNERSHIP RATES
Source: CBRE Research, U.S. Census Bureau, Q3 2019. Not seasonally adjusted. Metros 2+ million population. Arrows indicate directional change from Q3 2018.Note: margin of error for individual metros is fairly high.
SOME CONCLUDING THOUGHTS…
High and rising federal
debt would reduce national
saving and income, boost
the government’s interest
payments, limit lawmakers’
ability to respond to
unforeseen events, and
increase the likelihood of a
fiscal crisis.
Washington, we have a problem!
Federal Debt Held by the Public
Perce
ntag
e of G
ross
Dom
estic
Pro
duct
U.S. BUDGET
Source: Congressional Budget Office.
RISKS TO THE DOWNSIDE
• Politicians pressured to re-open too quickly
• Emerging markets stress
• Oil price slump
• A winter revival of COVID-19
• U.S. political tension with China
RISKS TO THE UPSIDE
• Curves are bending as predicted
• More fiscal and monetary stimulus on its way
• 70% of recent jobless claims are temporary
• Corporate America gearing up for re-start
• Oil price falls and rent falls – will be good for growth
BOTTOM LINE
• A wide V-shaped trajectory for GDP growth – Stabilization in Q3 and recovery in Q4– Strong growth in 2021
• Unemployment takes 24-36 months to fall back – A swift but partial recovery in labor demand in H2
• A swoosh-shape recovery for real estate– Industrial 12 month– Office 24 month – Retail 36 month
LONGER-TERM OUTLOOK
• The lagged effect of monetary policy and a sharp increase in government debt – Is it inflationary?
• Reshoring of production – will it push prices up?
• Don’t underestimate the impact of pent-up demand
• The capex deficit – creates the need for investment surge
• Upside from Q4 onwards with big catch-up in 2021
• Capital values broadly resilient over 24-36 months
THANK YOU!PLEASE DON’T HESITATE TO CONTACT US.
This presentation has been prepared in good faith based on CBRE’s current views of the commercial real-estate market. Although CBRE believes its views reflect market conditions on the date of this presentation, they aresubject to significant uncertainties and contingencies, many of which are beyond CBRE’s control. In addition, many of CBRE’s views are opinion and/or projections based on CBRE’s subjective analyses of current marketcircumstances. Other firms may have different opinions, projections and analyses, and actual market conditions in the future may cause CBRE’s current views to later be incorrect. CBRE has no obligation to update its viewsherein if its opinions, projections, analyses or market circumstances later change.
Nothing in this presentation should be construed as an indicator of the future performance of CBRE’s securities or of the performance of any other company’s securities. You should not purchase or sell securities – of CBREor any other company – based on the views herein. CBRE disclaims all liability for securities purchased or sold based on information herein, and by viewing this presentation, you waive all claims against CBRE and thepresenter as well as against CBRE’s affiliates, officers, directors, employees, agents, advisers and representatives arising out of the accuracy, completeness, adequacy or your use of the information herein.© Copyright 2020 CBRE
DARIN MELLOTTDirector of Research,AmericasCBRE Research +1 801 869 8014darin.mellott@cbre.com
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