COVID-19 TRACKER CORONAVIRUS · BUT AT DIFFERENT STAGES: DAILY CASES Source: Johns Hopkins University & Medicine Coronavirus Research Center Updated 4-14-2020 0 10 20 30 40 3/14 3/20

COVID-19 TRACKER

ECONOMIC IMPACT

CRE FUNDAMENTALS

CAPITAL MARKETS

THINGS TO THINK ABOUT

CORONAVIRUSIMPACT ON THE PROPERTY MARKETSFOCUS: U.S. & CANADA

APRIL 2020

COVID-19 TRACKERThe path of the virus - its spread, its duration, its severity - are all central to our ability to model the impact on property.

Key Observations:

• The number of new cases has stabilized and appears to have peaked over the last two weeks.

• However, although trending better globally, the virus is spreading at different rates across different communities.

• Countries are unlikely to loosen lockdowns and restrictions until they are confident that the number of active cases has fallen to a low level and the daily growth in newly confirmed cases is low (~1%).

• Discussion of next steps has moved from lockdown to reopening the economy in many countries and in states across the U.S. We aren’t there yet, but we are moving in the right direction.

PROGRESS IS BEING MADEDaily Growth in Global Confirmed Cases

Source: John’s Hopkins University, Cushman & Wakefield Research

0

20,000

40,000

60,000

80,000

100,000

03/15

/20

03/19

/20

03/23

/20

03/27

/20

03/31

/20

04/04

/20

04/08

/20

04/12

/20

One Day Change Seven Day Average

BUT AT DIFFERENT STAGES: DAILY CASES

Source: Johns Hopkins University & Medicine Coronavirus Research Center

Updated 4-14-2020

0

10

20

30

40

3/14 3/20 3/26 4/1 4/7 4/13

Thou

sand

s

United States

Daily Cases 7-day trailing average

0

1

2

3

4

5

6

7

3/14 3/20 3/26 4/1 4/7 4/13

Thou

sand

s

Italy


0

2

4

6

8

3/14 3/20 3/26 4/1 4/7 4/13

Thou

sand

s

Germany


0

1

1

2

2

3

3

3/14 3/20 3/26 4/1 4/7 4/13

Thou

sand

s

Canada


0

1

2

3

4

5

6

3/14 3/20 3/26 4/1 4/7 4/13

Hun

dred

s

Philippines


0

2

4

6

8

10

3/14 3/20 3/26 4/1 4/7 4/13

Thou

sand

s

United Kingdom


0

1

1

2

2

3

3

3/14 3/20 3/26 4/1 4/7 4/13

Thou

sand

s

Russia


0

2

4

6

8

10

3/14 3/20 3/26 4/1 4/7 4/13

Hun

dred

s

Japan


Stabilizing/Trending Better

Unclear/Trending Worse

Key Observations:

• China & South Korea are often cited as countries that have a better handle on combating the virus.

• Using Mainland China as a roadmap, the lockdown period for most of the country lasted 75 days before they partially reopened the economy.

• South Korea is combating the virus without completely closing its economy, but activity and confidence remain very weak.

GETTING A BETTER SENSE OF TIMING

Source: Johns Hopkins University, Various media outlets

Updated 4-17-2020

1/1 1/8 1/15 1/22 1/29 2/5 2/12 2/19 2/26 3/4 3/11 3/18 3/25 4/1 4/8 4/15

Lockdown1/23-24

New cases peak2/13 Partial

reopening of economy

3/28

SOUTH KOREA

Reopen economy

4/8

1/1 1/8 1/15 1/22 1/29 2/5 2/12 2/19 2/26 3/4 3/11 3/18 3/25 4/1 4/8 4/15

MAINLAND CHINA

Initial case decline

3/11

Case decline begins

2/22

First case1/20

New cases peak2/29

Case declinebegins 3/22

Rebound from nursing home outbreak 3/19

Confidence remains

weak

Key Observations:• There is risk that this is

seasonal, meaning it goes away and comes back, or that we keep re-infecting each other.

• We are observing a resurgence in Singapore where the second wave of infections is larger than the first, leading to a return of lockdowns. A resurgence is also occurring in Hong Kong & Taiwan.

• We continue to watch these daily trends very carefully to inform our analysis.

COVID-19 RESURGENCE TRACKERDaily Growth in Confirmed Cases

Source: Johns Hopkins University

Updated 4-14-2020

0

50

100

150

200

250

300

3/15/2

020

3/18/2

020

3/21/2

020

3/24/2

020

3/27/2

020

3/30/2

020

4/2/20

20

4/5/20

20

4/8/20

20

4/11/2

020

4/14/2

020

China S Korea Singapore

3

5

9

12

20

45

47

86

227

0 50 100 150 200 250

Devices

RNA-based

Cell-based Therapies

Scanning Compounds to Repurpose

Anti-virals

Antibodies

Others

Vaccine

Total

Key Observations:

• The international science community is all over this.

• There are 86 coronavirus vaccines are already in development globally, and 3 already being tested in human trial.

• Other experimental drugs and therapies are showing promise.

• Studies indicating some portion of the world’s population have already been infected and have built up immunity. Others show that the transmission rate is likely to drop substantially as the warmer summer months approach.

REASONS FOR OPTIMISMTreatment/Vaccine Tracker

Source: Milken Institute Covid-19 Tracker, Cushman & Wakefield

Updated 4-16-2020

ECONOMIC IMPACTA painful – but possibly short-lived recession – and then the rebuild begins.

GLOBAL RECESSION IN 2020World GDP, %

Source: IMF, Cushman & Wakefield Research

Updated 4-16-2020

-4

-3

-2

-1

0

1

2

3

4

5

6

7

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

2014

2016

2018

2020

Early 80’s recession: High inflation/energy

crisis

0.6%

Great Financial Crisis

-0.1%

Great Lockdown Recession

-3.0%

Perhaps a great rebound?

Key Observations:

• COVID-19 and government-imposed “lockdowns” are shrinking global growth dramatically.

• The global economy is projected to contract sharply, by -3% in 2020, much worse than during the GFC.

• The majority of advanced and emerging economies are assumed to be in recession in 2020H1.

• Assuming the pandemic fades in the second half of 2020, the economy is expected to rebound sharply and grow by 5.8% in 2021.

BRUTAL Q2Real GDP, Second Quarter of 2020, Annualized %

Source: Oxford Economics, Cushman & Wakefield Research

Americas Europe Asia Pacific

-32

-38

-18

-30 -30 -29 -29

-23 -22

-34-30

-1

-17

-34

-19

-33

-10

-45

-40

-35

-30

-25

-20

-15

-10

-5

0

Uni

ted

Sta

tes

Can

ada

Mex

ico

Euro

zone

Fran

ce

Ger

man

y

Italy

Net

herla

nds

Pola

nd

Spai

n

Uni

ted

Kin

gdom

Chi

na

Hon

g K

ong

Indi

a

Japa

n

Sing

apor

e

Sout

h K

orea

Key Observations:

• Initial claims filed over thelast four weeks are alreadymore than double the joblosses registered during theGreat Recession.

• The initial claims dataimplies the unemploymentrate could have gone from~3.5% to around 16% in amatter of weeks.

• Importantly, however, manyof these job losses mayprove to be temporary asthe economy is widelyexpected to enter recoveryin 2020H2.

JOB LOSSES MOUNTINGUnited States

Source: BLS, ETA, CNBC Graphic

Updated 4-16-2020

Jobs created since Great Recession trough

(2/1/2010 – 2/1/2020)

Initial jobless claims since 3/21

Great Recession total job losses (peak to

trough)

Initial jobless claims filed during Great Recession

(12/1/2007 – 6/30/2009)

8.7M

3.3M(3/21)

24.8M

39.5M

6.6M(4/4)

5.2M(4/11)

6.9M(3/28) 22.0M

U.S. SCENARIOS

Source: Moody’s Analytics & Oxford Economics Scenario descriptions adjusted By Cushman & Wakefield Research

Updated 4-19-2020

SCENARIO 1 (V-SHAPE) SCENARIO 2 (U-SHAPE) SCENARIO 3 (SWOOSH)

Epid

emio

logi

cal

Ass

umpt

ions

Econ

omic

St

atis

tics

• Coronavirus resolves much sooner thanexpected

• New cases fall rapidly starting in May

• Partial reopening of the economy in May

• Full reopening in June/July

• Assumes quicker medical breakthrough orvirus burns out

• Coronavirus slower to resolve

• New cases trend lower but still up anddown, consumer remains highly cautious

• Partial reopening in May

• Economy does not become fully engageduntil proven vaccine or therapeutics

• Assumes slower medical breakthrough

• Coronavirus lingers for much longer

• New cases trend lower, but multiple waves

• Partial reopening in May

• Economy does not become fully engageduntil proven vaccine or therapeutics

• Assumes slower medical breakthrough oreventual herd immunity

• Milder recession in Q1,sharp in Q2

• Unemployment peaks in Q2 and fallsprecipitously as people go back to work

• Strong snapback in H2

• Momentum into 2021

• Return to full employment by 2022

• Harsh recession in H1

• Unemployment peaks in Q2 but remainselevated and is slower to come down

• Mathematical bounce in Q3, but growthremains sluggish until medical breakthrough

• Slower climb into 2021


• Deeper recession

• Unemployment peaks in Q2, but elevatedfor years

• Bounce in Q3, then back in recession asvirus flares up again in the fall

• Recovery start date pushed into 2021H2


15,000

16,000

17,000

18,000

19,000

20,000

21,000

22,00020

19Q

4

2020

Q1

2020

Q2

2020

Q3

2020

Q4

2021

Q1

2021

Q2

2021

Q3

2021

Q4

2022

Q1

2022

Q2

2022

Q3

2022

Q4

2023

Q1

2023

Q2

2023

Q3

2023

Q4

2024

Q1

2024

Q2

2024

Q3

2024

Q4

Billi

ons

of U

SD

V-Shape Short U-Shape Swoosh Key Observations:

• The sharp decline will be painful, as painful as it gets, but relatively short-lived. One horrible quarter, which we are already in.

• After that, there is growth. Whether that’s fast or slow depends on a lot of factors, but in the two most probable scenarios*, demand starts rising in Q3.

THE ROAD BACK TO 2019U.S. Real GDP

Source: V-shape = Oxford Economics Baseline (April 14); U-Shape = Moody’s Analytics Baseline, Swoosh = Moody’s Analytics S3 scenario (April 10)

*Swoosh is a low probability tail risk

Short-U: return to 2019 GDP by 2022Q2

Swoosh: return to 2019 GDP by

2023Q1V-shape: return to 2019 GDP by 2021Q1

STOCK MARKET LOOKING MORE OPTIMISTICWilshire 5000, $tril.

Source: Yahoo! Finance, Cushman & Wakefield Research

Updated 4-15-2020

22,000

24,000

26,000

28,000

30,000

32,000

34,000

1/6/20

20

1/15/2

020

1/24/2

020

2/2/20

20

2/11/2

020

2/20/2

020

2/29/2

020

3/9/20

20

3/18/2

020

3/27/2

020

4/5/20

20

4/14/2

020

$5 trillion of stockholder wealth

regained in 4 weeks

Key Observations:

• Equity markets still swinging wildly but have generally been rallying for the last few weeks.

• The rebound is likely due to the speed and size of the unprecedented fiscal and monetary response.

• This implies that investors have removed the darkest tail risk scenario (i.e. coronavirus forever, not enough stimulus).

• As real estate investor’s confidence returns, perhaps this is an early indication of the potential rebound to occur in investment sales.

$1.5 $2.4

$12.3

$9.7

10%11%

85%

45%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

$0

$2

$4

$6

$8

$10

$12

$14

2008-10 Congress March 2020 Congress 2008-10 (including Fed &Regulators)

March 2020 (including Fed)

Dollars in trillions (lhs) Percent of GDP* (rhs)

POLICY RESPONSE BIG & FAST (PLUS, MORE TO COME)Comparing Stimulus Programs: GFC vs. Covid-19 Crisis

Source: Center on Budget and Policy Priorities, Oxford Economics/Moody’s Analytics, Cushman & Wakefield Research. 2007 nominal GDP used for GFC, 2019 nominal GDP used for present.

https://www.cbpp.org/research/economy/the-financial-crisis-lessons-for-the-next-one

AND IT’S GLOBAL...

Source: Various Central Banks

CENTRAL BANK POLICY RATE – MAR 2020

POLICY RATE

– MAR 2019

DATE OF LATEST RATE

CHANGE

DIRECTION OF LATEST RATE

CHANGEEASING/

TIGHTENING OTHER MEASURES

Federal Reserve 0.00% to 0.25%

1.00 to 1.25% Mar 2020 Down Easing

• Over the coming months will increase holdings of Treasury securities by at least $500B and agency MBS by at least $200B.

• Announced special credit facility to purchase corporate debt that could total $1T funded by Treasury Exchange Stabilization Fund. Will extend liquidity of up to $5T.

Bank of Canada 0.75% 1.75% Mar 2020 Down Easing

• Establishing a Business Credit Availability Program which will further support financing in the private sector, adding $10B to support businesses.

• Also lowering Domestic Stability Buffer requirement for systemically important banks by 1.25%.

Bank of England 0.25% 0.75% Mar 2020 Down Easing• Term Funding Scheme introduced with additional incentives for

small and medium-sized enterprises.• Maintain stock of UK government bond purchases financed by

issuance of GBP 435B of central bank reserves.

European Central Bank 0.00% 0.00% Mar 2016 Down Easing

• Additional longer-term refinancing operations.• Additional €120B Euro net asset purchases will be added until the

end of the year. • Interest rates remain unchanged. Reinvestments of principal

payments from maturing securities to continue.

Bank of Japan -0.10% -0.10% Feb 2016 Down Easing • Holding rates steady buy will double purchases of ETFs (risky assets) to about ¥12T to help companies get loans.

People’s Bank of China 4.05% 4.35% Feb 2020 Down Easing• Not issuing any “short-term stimulus” measures. Has focused on

measures to relieve financial stresses on companies and their creditors.

Reserve Bank of Australia 0.50% 1.5% Mar 2020 Down Easing • $90B in funding to SMEs.• Emergency rate cut and QE.

Reserve Bank of India 5.15% 6.25% Oct 2019 Down Easing • $2B US dollar sell/buy swap & LT Repo Operation of up to 1T Rs.

CRE FUNDAMENTALSGenerally solid coming into the crisis, but now feeling the COVID-19 impact.

0%

2%

4%

6%

8%

10%

12%

14%

16%

Office Industrial Retail Multifamily

2019 Q4 Historical Average Key Observations:

• Regional variations aside, commercial real estate (CRE) entered this crisis with generally solid fundamentals.

• U.S. vacancy rates are well below historical averages. Commercial property types are 165-225 bps below their respective 10-year averages.

• The supply pipeline is also more disciplined than at the end of previous expansionary periods.

CRE ENTERS THE CRISIS ON SOLID FOOTINGOverall U.S. Vacancy Rates Below Historical Averages*

Source: Cushman & Wakefield Research; CoStar Group, Reis

*Historical average = annual average 1999-2019

OFFICESECTOR

U.S. OFFICE LEASING: PRELIMINARY OBSERVATIONSMarket Moving Slowly, Marked by Delays and Uncertainty

Source: Cushman & Wakefield Research

Updated 4-17-2020

• Many occupiers and landlords are in “wait-and-see” mode. Companies are distracted by the impact to current operations; focused on figuring out how to deal with remote workers, closed locations and disrupted supply chains.

• Broadly speaking, tenants and office landlords are having positive conversations about how to manage the current situation. Cash flow is an issue for occupiers, but the vast majority of April rent was paid. There is now more space for further discussions / negotiations.

• COVID-19 is causing disruptions to construction projects. Builders are having a difficult time getting raw materials due to supply chain disruptions and getting the labor, permits, and inspections needed to build due to social distancing and construction moratoriums.

• There are a few examples where landlords will not sign previously agreed upon contracts because they have lost faith that they can deliver the space needed for the tenant due to COVID-19 uncertainty.

• There is a clear slow down in activity. Leasing activity in Q1 2020 was at its lowest point since 2015. A third of office markets experienced declines in asking rents quarter-over-quarter.

• Some occupiers are considering shorter-term leases during a period of increased uncertainty, and are requesting to investigate blend and extend or are asking to renegotiate terms.

• In-person space tours are difficult or impossible in some locales based upon recommendations and directives to limit interaction and group meetings. The process backlog may push back timelines on leases that previously would have been scheduled to be signed in Q2 or early Q3. Look for technology (e.g., drone tours) to be leaned on to assist during social distancing periods.

2019Q1 2020Q1 DIRECTION

United States 5,839,968 4,135,561

Atlanta -1,938,166 1,029,365

Austin 858,058 157,052

Boston 851,738 -623,114

Chicago 633,679 270,078

Dallas 925,436 92,306

Denver 756,860 423,835

Los Angeles -173,003 1,227,324

Manhattan -3,656,576 -692,522

SF Bay Area* 696,617 -1,608,802

Greater Seattle** 743,366 366,397

Silicon Valley 130,030 385,680

Washington, DC 514,267 -200,427


United States 12.9 13.2

Atlanta 19.6 18.3

Austin 9.6 10.0

Boston 9.9 9.2

Chicago 17.2 17.9

Dallas 18.2 18.6

Denver 15.0 14.0

Los Angeles 14.6 14.4

Manhattan 10.7 11.3

SF Bay Area* 8.6 9.5

Greater Seattle** 7.1 7.4

Silicon Valley 9.8 9.9

Washington, DC 13.3 15.8

HOT OFF THE PRESSU.S. Office Market Snapshot – Q1 2020 (Select Markets)


* Includes San Francisco and East Bay/Oakland Markets Only; ** Includes Seattle and Puget Sound Eastside

DEMAND (NET ABSORPTION) SUPPLY (VACANCY)


Canada 1,246,850 203,282

Calgary -2,739 -713,491

Edmonton 25,574 -227,285

Montreal 795,650 233,152

Ottawa 16,826 -198,577

Toronto -369,804 333,841

Vancouver 398,453 142,354


Canada 9.9 9.3

Calgary 20.8 21.6

Edmonton 14.5 15.7

Montreal 10.9 8.9

Ottawa 7.6 7.7

Toronto 6.0 5.2

Vancouver 3.8 3.4

HOT OFF THE PRESSCanada Office Market Snapshot – Q1 2020 (Select Markets)



0

10

20

30

40

50

60

70

80

9020

16 Q

1

2017

Q1

2018

Q1

2019

Q1

2020

Q1

MSF

Key Observations:

• Q1 2020 leasing (61 msf) is down 25% year-over-year (YOY).

• Leasing in the first half of the quarter was strong, but slowed down dramatically as the virus’ spread impacted the U.S. directly.

• Expect low activity in Q2 as most occupiers are waiting to see how “re-entry” plays out.

LEASING ACTIVITY DOWN SHARPLY National (U.S.) Leasing Activity by Quarter


Updated 4-17-2020

Key Observations:

• New deliveries over the past three years have been considerably lower than the three years leading into the previous two recessions:

• 1999-2001: 341 msf• 2007-2009: 203 msf• 2017-2019: 159 msf

• However, there are some markets scheduled to add significant square footage by the end of 2021, which will increase vacancy and impact rents.

TOP 30 OFFICE CONSTRUCTION MARKETSUnited States: Estimated New Completions, 2019-2021


Updated 4-17-2020

Rank City Completions % of Inv.

16 New York - Brooklyn 4,657,244 15.3%17 Houston 3,664,284 1.9%18 Northern VA 3,502,608 2.6%19 Minneapolis/St. Paul 3,283,019 4.3%20 Salt Lake City 3,210,221 8.3%21 San Diego 3,170,692 3.9%22 Denver 2,805,415 2.4%23 Sacramento 2,732,416 3.0%24 Suburban MD 2,701,787 4.5%25 St. Louis 2,457,032 4.9%26 Oakland/East Bay 2,201,156 2.0%27 Pittsburgh 2,180,927 2.4%28 San Francisco 2,174,034 2.6%29 Omaha 2,023,204 10.6%30 Miami 1,790,808 3.9%

Rank City Completions % of Inv.

1 San Jose 10,889,277 5.0%2 New York - Midtown 8,943,234 3.6%3 Atlanta 8,113,871 5.5%4 Dallas 8,074,330 3.7%5 Austin 7,792,385 14.2%6 Chicago 7,534,131 3.2%7 San Mateo County 7,314,922 12.4%8 New York - Midtown South 7,124,310 10.4%9 Charlotte 7,008,870 13.3%10 Seattle 6,277,543 9.7%11 Boston 5,355,146 3.1%12 Phoenix 5,200,406 4.9%13 Washington 4958631 4.4%14 Los Angeles Non-CBD 4,870,553 2.8%15 Nashville 4,776,020 11.3%

0

10

20

30

40

50

60

70

80

90

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

Q1

MS

F

Non-CBDCBD

Key Observations:

• Availability of sublease space is a sign of softness in the market as occupiers look to cut costs and offload excessive space. This is where vacancy will show up first.

• Total sublease space increased 7.2% quarter-over-quarter in Q1 2020 to 67.3 msf, but remains well-below the 2009 peak (88.1 msf).

WATCH FOR RISING SUBLEASE ACTIVITYAvailability of Sublease Space


Updated 4-17-2020

0.0 2.0 4.0 6.0 8.0

TucsonJacksonville

NashvilleOrange County

PhoenixMinneapolis

Salt Lake CityAustin

San FranciscoAtlanta

NJ - NorthernNY - Midtown So.

NJ - CentralHouston

Silicon ValleyNY - Midtown

MSF

Q4 2019 Q1 2020 Change

AVAILABLE SUBLEASE SPACE MARKETS WITH LARGEST Q1 2020 INCREASE IN SUBLEASE SPACE

Key Observations:

• Office vacancy & unemployment generally trend together.

• However, the brief surge in remote working should not, on its own, cause office vacancy rates to rise significantly right away (91% of all office leases are two years in length or longer).

• The unemployment rate will be a key metric to watch going forward, not just the immediate spike, which is now expected, but also the trajectory of the improvement during the recovery.

AS UNEMPLOYMENT GOES, SO GOES VACANCYUnited States

Source: Cushman & Wakefield, Moody’s Analytics Baseline Unemployment Forecast Made updated 4-17-2020

*C&W Research is updating its models and will be released updated forecasts in the coming weeks.

0%

3%

6%

9%

12%

15%

18%

21%

2007

Q1

2007

Q4

2008

Q3

2009

Q2

2010

Q1

2010

Q4

2011

Q3

2012

Q2

2013

Q1

2013

Q4

2014

Q3

2015

Q2

2016

Q1

2016

Q4

2017

Q3

2018

Q2

2019

Q1

2019

Q4

2020

Q3

2021

Q2

2022

Q1

2022

Q4

Office Vacancy Unemployment

*Vacancy forecasts are a rough estimate based on U-shape scenario

26,000

28,000

30,000

32,000

34,000

36,000

$24

$26

$28

$30

$32

$34

2007

Q1

2008

Q1

2009

Q1

2010

Q1

2011

Q1

2012

Q1

2013

Q1

2014

Q1

2015

Q1

2016

Q1

2017

Q1

2018

Q1

2019

Q1

2020

Q1

2021

Q1

2022

Q1

Asking Rents (left scale) Office-using employment (ths., right scale)

Key Observations:

• Demand is expected to slow and turn negative, and sublease space is expected to come back as layoffs free up space creating more leverage.

• Under the U-shape scenario, we expect rents to fall by ~10% in the U.S. from peak to trough.

RENTS STICKIER, BUT CORRECTION IS COMINGUnited States

Source: BLS, Moody’s Analytics, Cushman & Wakefield Research

*C&W Research is updating its models and will be released updated forecasts in the coming weeks.

*Rent forecasts are a rough estimate based on U-shape scenario

INDUSTRIALSECTOR

U.S. INDUSTRIAL LEASING: PRELIMINARY OBSERVATIONS

• Demand heading into the current slowdown was much stronger than in prior periods with the recent rolling 3-quarter average of net absorption running 15.0% stronger than pre-Financial Crisis, and 17.0% stronger than before the dot-com bubble burst.

• Early observations on leasing are consistent with prior Q1 leasing during the expansion – it is too soon to say what effects COVID-19 has had on the U.S. industrial market. Rent relief requests from certain tenants are not uncommon.

• Longer-term, COVID-19 is accelerating the shift to eCommerce out of necessity. That may induce some longer-lasting behaviors in consumers.

• We expect the industrial-logistics sector to come out of this crisis stronger than ever.

Not All Good News, but Trajectory Remains Robust

• It is a mistake to think that COVID-19 is having no negative impact on the U.S. industrial sector. A large amount of industrial space is occupied by retailer/wholesalers, many of which are struggling. The possibility that some of these companies file for chapter-11 is high.

• Industrial markets, especially those along the coastsand dependent on global trade, are being negatively impacted. As West coast ports take a hit from trade with China, and the East coast from Europe – port proximate markets will likely see a slow down in leasing volume with less goods to house.

• Many industrial development projects have been put on hold as developers and investors take a “wait-and-see” approach to the market and economy.

• However, the industrial sector entered the crisis with extremely robust fundamentals and is positioned to weather the crisis better than most other product types.


Updated 4-17-2020



Atlanta 8.7 7.1

Chicago 5.5 5.1

Dallas / Ft. Worth 7.0 5.9

Houston 7.3 10.2

Indianapolis 4.6 4.4

Inland Empire 4.0 3.9

Kansas City 6.6 5.8

Los Angeles 1.6 2.1

NJ – Central 3.1 2.1

NJ – Northern 4.0 4.0

PA I-81/I-78 Corridor 7.6 7.9

Phoenix 7.0 7.1


United States 45,404,355 42,319,885

Atlanta 1,660,023 5,287,692

Chicago 3,287,279 3,863,518

Dallas / Ft. Worth 6,434,728 9,732,116

Houston 1,188,278 -730,500

Indianapolis 1,316,724 673,531

Inland Empire 2,072,417 2,262,511

Kansas City 1,193,262 628,997

Los Angeles -410,643 -945,830

NJ – Central 526,457 -21,680

NJ – Northern 1,977,680 456,299

PA I-81/I-78 Corridor 1,387,427 3,410,018

Phoenix 1,992,072 2,016,514

HOT OFF THE PRESSU.S. Industrial Market Snapshot – Q1 2020 (Select Markets)




Canada 3,849,593 1,133,310

Calgary 1,649,586 41,600

Edmonton 117,558 -126,995

Montreal 286,675 873,440

Ottawa -182,657 -106,176

Toronto 590,771 -727,010

Vancouver 868,150 1,109,846


Canada 3.1 2.8

Calgary 7.6 7.8

Edmonton 5.9 6.1

Montreal 4.3 3.3

Ottawa 4.8 4.4

Toronto 1.5 1.5

Vancouver 1.9 1.3

HOT OFF THE PRESSCanada Industrial Market Snapshot – Q1 2020 (Select Markets)



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Key Observations:

• Q1 2020 leasing (134 msf) is down 6.5% YOY. However, activity remains healthy.

• Going into this crisis, the U.S. industrial vacancy rate remained at a record low of 4.8% as of 2019 Q4.

• Vacancy is likely to increase, but remain extremely tight relative to historical precedents.

LEASING ACTIVITY STILL HEALTHY BUT SLOWERNational (U.S.) Leasing Activity by Quarter


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Key Observations:• Disruptions in supply chains in

Asia Pacific led to a drop of 5% in retail imports during the first two months of the year compared with January-February 2019.

• March is expected to come in at 1.3 million TEUs, which would be 21% below the previous year.

• Forecasts indicate retail imports will be below 2019 levels by approximately 20% for the next four months (through July).

• We expect the disruption in global trade to negatively impact industrial demand, particularly along the coasts.

CONTAINER VOLUMES DOWN SHARPLYMonthly Imports, Millions of Twenty-Foot Equivalent Units (TEUs)

Source: Cushman & Wakefield Research, NRF

* Forecast as of April 7, 2020.

5% 6% 6% 7% 8% 9% 10% 11%12%

13%15%

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$800

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eCommerce Sales ($bil, left scale)

eCommerce % of Total Retail Sales (right scale)

Key Observations:

• The necessity of shelter-in-place is accelerating the long-term shift to eCommerce. The current pandemic is likely to induce some longer-lasting behaviors in consumers.

• For every $1 billion of online sales, 1.2 msf in warehouse space is needed to fulfill those orders.

• Near-term stress combined with long-term strength is a potent formula for investment opportunity.

INDUSTRIAL COMES OUT STRONGER THAN EVEReCommerce Sales Trends

Source: Cushman & Wakefield Research; Digital Commerce 360 forecast for eCommerce sales in 2020 and 2021

RETAILSECTOR

U.S. RETAIL LEASING: PRELIMINARY OBSERVATIONSEconomic Impact of COVID-19 Will Accelerate Key Trends Already in Play

• eCommerce will surge. It is currently the only channel connecting with consumers for many categories of retail. While consumers will eventually return to brick-and-mortar stores, there is likely a permanent shift in behavior for many consumers.

• Emerging trend of buy-online, pickup-in-store (BOPIS)is already vastly accelerating, with many chains rushing to provide these capabilities.

• Economic downturn will favor value: dollar stores, discounters, warehouse club and lower price superstores.

• Necessity retail (i.e., grocery, convenience and drug stores) will be a bright spot; such sales have surged recently. The near-term economic impact of the crisis means that consumers will be focused on value and essentials both in-store and online.

• Social distancing will temporarily halt some of the hottest trends in physical retail: experiential concepts, entertainment, food and beverage, food halls, fitness clubs, upstart independent brands, digital native retailers and pop-up stores.

• Retail is moving from being a standalone shopping destination to becoming the ultimate amenity in live/work/play communities. The crisis will accelerate the ongoing trend of malls and shopping centers adding mixed-use elements.

• Many retailers already struggling with high debt loads will not survive the crisis.

• The crisis is also accelerating the ongoing demise of the weakest Class C shopping centers and malls.


Updated 4-17-2020


United States 2,326,982 -4,631,249

Atlanta 354,816 33,498

Austin -102,009 197,828

Boston 117,613 -181,506

Chicago 415,115 -106,271

Dallas -371,755 -592,880

Denver -350,381 60,964

Los Angeles -239,834 112,300

New York* 290,052 -315,293

SF Bay Area** -154,004 -17,821

Greater Seattle*** -97,575 31,157

Silicon Valley -65,929 -35,434

DC Metro**** -145,975 -90,557



Atlanta 6.7 6.7

Austin 5.3 5.3

Boston 3.5 4.0

Chicago 9.4 9.2

Dallas 7.2 7.7

Denver 6.2 6.4

Los Angeles 5.4 5.9

New York* 6.0 6.7

SF Bay Area** 5.0 5.1

Greater Seattle*** 5.2 4.4


DC Metro**** 4.8 5.0

HOT OFF THE PRESSU.S. Outdoor Shopping Center Market Snapshot – Q1 2020 (Select Markets)


* Includes New York MSA, ** San Francisco, North Bay and San Mateo County, *** Includes Seattle and Puget Sound Eastside, ****Northern VA, Suburban MD and Washington, DC


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Key Observations:

• Retail demand peaked in Q4 2014 at 15.8 msf. It has generally been on a downward trend since that time.

• Q1 2020 net absorption of -4.6 msf reflects the sharpest drop the market had seen since Q1 2009 (-8.1 msf).

• While the crisis began to impact demand levels and deal flow in March, it is critical to note that its full impact is not yet in the data.

RETAIL DEMAND NEGATIVE IN Q1 2020National (U.S.) Net Absorption by Quarter

Source: Cushman & Wakefield Research, Costar

13.0%

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15%

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30%

35%

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Class A Class B & C

Key Observations:

• Enclosed malls are being hit much harder by the crisis than outdoor centers, many of which have been able to remain open due to concentration of “essential” retailers.

• Brick-and-mortar retail accounted for 85% of all sales before the crisis. Even if eCommerce market share were to double, physical retail will remain the dominant way people shop.

• The retail sector is the most adaptive and innovative sector in CRE. It must be in order to react to quickly changing consumer preferences.

CERTAIN ASPECTS OF RETAIL TO THRIVE AGAINMALL “All-in” Vacancy Rate: Class A vs. The Rest

Source: Costar, Cushman & Wakefield: Vacancy rate includes all retail properties

MULTIFAMILY SECTOR

MULTIFAMILY: PRELIMINARY OBSERVATIONSTrue Test Still Coming…

• Operators have been agile, adjusting to the current situation. Collections have outperformed expectationsin March and April. Operators are working with tenants on payment plans, waiving late fees, accepting credit card payments and security deposit conversions. The number one priority for operators—after resident and employee safety and well-being—is retaining tenants and preserving cashflow.

• The proliferation of PropTech—virtual leasing, marketing, and e-payments—gained steam in recent years. The operators who implemented these early have reaped the benefits of more easily retaining tenants and enabling a certain level of new tenant traffic to occur. While traffic levels are down, new lease conversion rates are up.

• The expansion of federal unemployment benefits, with an additional $600 per week through the end of July, has helped buoy rent collections.

• The multifamily transaction market paused as of mid-March. The exceptions are deals that were already in progress pre-COVID and time-sensitive deals such as 1031 exchanges, although new guidance has been released by the government for the latter.

• CMBS and debt funds have been sidelined. Unlike other CRE sectors, there is available debt for multifamily assets through agency and LifeCo options. However, the rates have been fluctuating and there is general bias for stronger assets, sponsors and MSA’s less affected by COVID-19 conditions.

• Pre-COVID-19 projections showed an increase in deliveries in 2020. However, construction projects have been delayed. In a recent NMHC survey, roughly half of the respondents indicated construction project delays.


Updated 4-17-2020



Atlanta 8.8 9.0

Austin 7.6 8.4

Baltimore 6.6 7.0

Boston 4.9 6.2

Chicago 6.6 6.6

Dallas/Ft. Worth 8.5 8.7

Denver 7.5 8.0

Detroit 5.8 6.7

Houston 9.6 10.2

Kansas City 7.5 7.4

Las Vegas 6.5 7.1

Los Angeles 4.4 4.6


Miami 5.8 6.2

Minneapolis 4.1 5.1

New York 2.3 2.4

Orlando 6.8 8.0

Philadelphia 5.7 6.0

Phoenix 6.0 6.6

Portland 5.9 6.7

San Diego 4.8 4.9

San Francisco 4.2 5.0


Seattle 6.1 5.6

Tampa 7.3 6.7

Washington, DC 6.1 6.3

HOT OFF THE PRESSU.S. Multifamily Market Snapshot – Q1 2020 (Select Markets)

Source: CoStar Group, Cushman & Wakefield Research

Note: Trends include all multifamily asset subtypes and properties in lease-up.

SUPPLY (VACANCY)

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Key Observations:

• Apartment absorption in Q1 2020 was just shy of 65,000 units, which is 18.5% off the 5-year average for the first quarter of the year.

• Federal support is helping buoy rent payments and occupancy, but a drop off could occur when those programs roll off.

ABSORPTION STILL STRONG, BUT SLOWERUnited States: Net Absorption (4-Quarter Trailing)

Source: CoStar Group, Cushman & Wakefield Research

ALTERNATIVES

ALTERNATIVES: PRELIMINARY OBSERVATIONSSince the Coronavirus Outbreak…

• Medical Office: The COVID-19 crisis has made telemedicine more mainstream, with a new high in the volume of calls. Going forward doctors’ offices and group practices will all need to have a telemedicine hub as part of their operations. The need for rapid shifting of space from one form of treatment to another (operating room to ICU) points to the need for flexibility in design. However, this flexibility can be costly. The financial stress being felt by some hospitals and healthcare systems may lead to a push toward monetization of assets if it is feasible.

• Life Science: The life science sector has been resilient in the last two recessions, with employment growing through the downturn while other sectors lost jobs. Vacancy is lower and rents are generally higher for lab space than for office space in the major life science markets. Social distancing has disrupted clinical trials in the sector which can lead to delays in the pharmaceutical process, however, the industry is at the forefront of resolving COVID-19 with testing and vaccine development.

• Self-storage: Demand for self storage has counter-cyclical properties – it often comes from positive and negative life events such as moving, birth, death, marriage, or divorce. Self storage REITs have recently been outperforming all other asset types except for data centers and cell towers due to the stability of the asset class.

• Data Centers: These have risen to the forefront as large corporations learn to modify their IT infrastructure on the fly as employees work from home. Data center REITs have performed well during the crisis, with the expectation of far greater investment across the industry as circumstances move toward normalcy.

• Senior Housing: Factoring in the vulnerability of its tenant population and the headline risk, senior housing has fared better than expected early on in this crisis. According to NIC’s most recent senior housing survey (April 1-12), 60% to 62% of independent living and memory care operators reported no change or an increase in occupancy compared to the prior month. Long term, independent living may have risk depending upon tenants’ preferences for remaining in the home and hiring in-home care.

• Student Housing: Rent payment delinquency has remained relatively low through the first weeks in April. However, the full impact will not be seen until the start of the next school year, as spring is prime leasing season. Coming out of this crisis, Tier 1 student housing properties in major markets are projected to fare better as this population is anticipated to have a higher propensity to return back to student housing quickly.

CAPITAL MARKETSMost investors remain in a “wait and see” posture.

INVESTMENT SALES SLOWING QUICKLYExpect Similar Sudden Stop in Transaction Activity in EMEA, Americas

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Americas Weekly EMEA Weekly AsiaPac Weekly2020 Weekly 2017 2018 2019 2020

Key Observations:

• Sales data still being compiled for Q1, but expect sharp drops in activity to be reported across all global regions.

• Early readings out of Asia Pacific – the first to feel the full brunt of COVID19 – show sales down ~57% compared to a year ago.

• The pace of recovery should be faster than in the GFC because of abundant capital, though fundraising could still be adversely effected by portfolio balance effects from the equity market sell-off.

Source: RCA, Cushman & Wakefield Research

Global Year-to-Date Transaction ActivityDollars in billions

-2% YoY

-21% YoY

-57% YoY

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Office Industrial Apartment Retail

Key Observations:

• As of now, there are no clear signs of panic-selling.

• It is difficult, if not impossible to price risk right now, so investors are still very much in “wait and see mode.”

• REIT implied cap rates have expanded modestly YTD: office +40 bps YTD, industrial -10 bps, retail +110 bps YTD, apartment +40 bps YTD.

PRICING WILL BE STICKIER – BUT TOO EARLY TO TELLU.S. Cap Rates

Source: RCA, Cushman & Wakefield Research

REITS INDICATE A PRICE CORRECTION IS COMINGYear-to-Date Total Return Performance: U.S. REITs (%)

Source: NAREIT, Cushman & Wakefield Research

Updated 4/16/20

15.9

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Hotel Sector: Occupancy has fallen by 70% globally, Revpar down ~60%.

Har

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Retail: Social distancing – massive disruption. Strength in spots (e.g. grocery & pharma).

Office: Any sector that supports human interaction is exposed.

Housing: Uncertainty putting big pause on home sales.

Multifamily: More resilient, not immune. Enters crisis overbuilt if demand falls off.

Industrial: More resilient. Supply chain disruptions but even stronger shift to eCommerce.

Storage: More resilient, but not immune.

Data Centers: Stay at home economy, more data. Somewhat GDP agnostic.

INVESTMENT SALES TYPICALLY TRACK WITH STOCK MARKET

Source: DJIA, Cushman & Wakefield Research

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U.S. Investment Sales ($bil, left scale)DJIA (right scale)

DOW VS. INVESTMENT SALES REITS VS. INVESTMENT SALES

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U.S. Investment Sales ($bil, left scale)REITs Composite Index (right scale)

Key Observations:

• The equity markets and REITs are reasonably correlated with investment sales.

• Both the equity and investment sales markets were humming along until late February, leaving only a month of disruption for the sales market.

• By the end of March ~80% of deals had been placed on hold. Should this continue, then transaction activity will be down dramatically in Q2.

• On the other hand, if the equity rally is sustained and the CRE debt markets re-open, then transaction activity may resume albeit at a lower level.

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North America Europe Asia Rest of World

Key Observations:

• Dry powder is at record levels; in other words, there is tons of cash on the sidelines.

• Value-add, opportunistic and debt funds have particularly large war chests.

• Following the GFC, LPs sought to discourage their private asset managers from calling capital. This is happening now to a much lesser extent amid the rebound in equities.

• Our sense of the market is that there is considerable latent risk appetite and the capital to act on it once liquidity returns to the market.

WHEN THIS TURNS, LOOK OUTDry Powder at Closed End Real Estate Funds

Source: Preqin, Cushman & Wakefield Research

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Key Observations:

• At the peak of QE, the Fed bought $120bn of Treasuries per month. Today they are buying $70bn each day!

• The Fed has already added $1.1 trillion of treasuries securities to its balance sheet in less than 1 month.

• The rounds of QE during the Great Recession had a positive impact on CRE values, this is QE on steroids.

• On top of buying up Treasuries, the Fed has become a buyer –indeed, buyer/lender of last resort – in a growing number of markets: MBS, CMBS, ABS, CP, Investment grade bonds, and more.

FED IS CRANKINGChange in Level of Treasury Securities Held Outright, $bil

Source: Federal Reserve, Cushman & Wakefield Research

QE – we thought this was big at the time

SPREADS AT 20 YEAR HIGH

Source: Real Capital Analytics, Cushman & Wakefield Research

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10-Yr Treasury Yield U.S. Office Cap Rate

Current: 590 bps

Historical Average: 410 bps

Historical Avg. *Current

Office 410 590

Industrial 427 565

Multifamily 322 482

Retail 400 600

OFFICE CAP RATES VS. 10-YR TREASURY YIELD

CAP RATE SPREADS OVER 10-YR (BPS)

*As of 4/20/2020

ATTRACTIVE GLOBALLYPrime Office Cap Rates Spread to 10-Year Gov’t Bond (bps)

Source: Real Capital Analytics, Altus Insite Investment Trends Survey, Cushman & WakefieldNote: U.S. cities based on top quartile rolling 12-month figures.

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APAC/CHINA AMERICASEUROPE

(*max/min refer to 2007-2019Q4)

THINGS TO THINK ABOUT

WHAT COULD BE LONG LASTINGThings to Think About…

• A different perspective on the workplace:• Policies: More attention paid to when illness leads

to remote work or taking sick time.• Layouts: Incorporation of six foot spacing into

workspaces.• Cleaning: Heightened attention on cleaning levels

and wording in lease documents.

• Use of technology to make life more touchless. For example, smart phones providing access through security and informing elevator which floor to utilize.

• Acceleration of wellness tracking:• Measuring air quality and increasing filtration to

minimize spread of airborne viruses or bacteria.• Utilizing facial recognition technology to measure

employee, customer and visitor temperatures.• Tracking employee vitals (but still much to work

through regarding privacy concerns).

• Changed perception of work-from-home. In many cases, organizations that have never had any (or any significant portion of) employees work remotely have been doing so due to shelter-in-place orders. However, it is likely that most workers will continue to access office space on a regular basis, even if they increase the frequency of remote work.

• A different perspective on CRE portfolios:• Fortune 500 companies identifying ways to reduce

their global footprint.• Exploration of workplace ecosystem, including

primary office space, co-locations, flex, and work-from-home.

• Greater comfort with virtual experiences, but still great value placed on the benefits of face-to-face interactions. The amenities and services provided in the workplace become even more important to drive employee experience.

KEY CONTACTS:

Garrick BrownVP, Americas Retail Services [email protected]

Jason TolliverAmericas Head of Industrial & Logistics [email protected]

David BitnerAmericas Head of Capital Markets [email protected]

Kristina Garcia Director, U.S. Multifamily [email protected]

Kevin ThorpeChief Economist, Global Head of [email protected]

Rebecca Rockey Economist, Global Head of [email protected]

David C. SmithAmericas Head of Occupier [email protected]

Carolyn SalzerDirector, Americas Head of Logistics & Industrial [email protected]

Ken McCarthyAmericas Head of Applied [email protected]

CORONAVIRUSIMPACT ON THE PROPERTY MARKETSFOCUS: U.S. & CANADA

APRIL 2020

About Cushman & WakefieldCushman & Wakefield (NYSE: CWK) is a leading global real estate services firm that delivers exceptional value for real estate occupiers and owners. Cushman & Wakefield is among the largest real estate services firms with approximately 53,000 employees in 400 offices and 60 countries. In 2019, the firm had revenue of $8.8 billion across core services of property, facilities and project management, leasing, capital markets, valuation and other services. To learn more, visit www.cushmanwakefield.com or follow @CushWake on Twitter.

DISCLAIMER: Cushman & Wakefield and our staff are not authorized or qualified to guide or influence you in the preparation of your own business continuity or preparations plans from a health and public policy perspective. While we are making efforts to ensure we are providing an up-to-date list of publicly available resources, all details on COVID-19, as well as health, economic and public policy implications, should be addressed with the advice of an independent specialist.

Copyright © 2020 Cushman & Wakefield. All rights reserved.

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COVID-19 TRACKER CORONAVIRUS · BUT AT DIFFERENT STAGES: DAILY CASES Source: Johns Hopkins University & Medicine Coronavirus Research Center Updated 4-14-2020 0 10 20 30 40 3/14 3/20