GLOBAL ECONOMIC AND REAL ESTATE OUTLOOK NAVIGATING …€¦ · GLOBAL ECONOMIC . AND REAL ESTATE OUTLOOK. NAVIGATING THE STORM. 4 MAY 2020. Wei Luo. Global Associate Director . Economics

DR. RICHARD BARKHAMGlobal Chief Economist & Head of Americas Research CBRE Research

GLOBAL ECONOMIC AND REAL ESTATE OUTLOOK

.

NAVIGATING THE STORM

4 MAY 2020

Wei LuoGlobal Associate Director Economics & Capital Markets CBRE Research

Daniel ChangGlobal Research Analyst Economics & Capital Markets CBRE Research

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

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

US Unemployment (%)

A TRUE GLOBAL SHOCKGlobal map of confirmed COVID-19 cases

REGION CONFIRMEDUnited States 1,175,782

Brazil 105,222Canada 61,813Spain 247,122Italy 211,938

United Kingdom 191,453France 168,693

Germany 165,914Russia 145,268Iran 98,647

Mainland China 82,884India 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, 4 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

ChinaJapan

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

ases

…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

ases

…EVERY 2 DAYS

…EVERY 3 DAYS

…EVERY WEEK

Days Since 100 Cases

Turkey

IndonesiaMexico

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, 4 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, 4 May 2020.

60

65

70

75

80

85

90

95

100

105

110

Inde

x

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

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

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

Inde

x>50

= E

xpan

sion

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

/Bar

rel

Barr

els/

Day

, M

illio

ns

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

hang

e (%

)

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

nces

(%)

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

2019

= 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

Real

GD

P G

row

th (%

)

Pre-COVID19 Forecast Revised Forecast

EXPECTED REBOUND IN 20212021 annual GDP growth forecast (April)


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

Real

GD

P G

row

th (%

)


U.S. ECONOMIC FORECASTS COMPARED Real GDP growth and headline unemployment rate (%)

Source: CBRE Research, April 2020.

-6.9

-6.0

-5.7

-5.3

-4.9

-4.9

-4.8

-3

9.9

6.1

5.5

7.5

5.1

6.1

2.2

1.7

Oxford Economics

Bank of America Merrill Lynch

Goldman Sachs

JP Morgan

WSJ Concensus

CBRE

National Association for Business Economics

Wells Fargo

Full-Year GDP Growth

2020 2021

8.7

8

5.4

10

9.7

8.7

7.4

8.3

15.2

15.6

10.5

20

12.6

15.2

12.0

15.1

Oxford Economics

Bank of America Merrill Lynch

Goldman Sachs

JP Morgan

WSJ Concensus

CBRE

National Association for Business Economics

Wells Fargo

Unemployment Rate

Q2 2020 Q4 2020

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 (%)


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


-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

0102030405060

2020Q1

2020Q2

2020Q3

2020Q4

2020Q1

2020Q2

2020Q3

2020Q4

2020Q1

2020Q2

2020Q3

2020Q4

Real

GD

P G

row

th (S

SAR,

%)


United States United Kingdom Canada



-5.8

-38.3

47.3

12.7

-8.5

-37.0

35.9

9.0

-15.1

-33.5

25.6

8.9

-50-40-30-20-10

0102030405060

2020Q1

2020Q2

2020Q3

2020Q4

2020Q1

2020Q2

2020Q3

2020Q4

2020Q1

2020Q2

2020Q3

2020Q4

Real

GD

P G

row

th (S

SAR,

%)


Germany France Italy



-2.4

-19.4

3.18.5

-34.6

42.4

24.5

10.0

-6.8 -9.7

8.3 5.8

-40

-30

-20

-10

0

10

20

30

40

50

2020Q1

2020Q2

2020Q3

2020Q4

2020Q1

2020Q2

2020Q3

2020Q4

2020Q1

2020Q2

2020Q3

2020Q4

Real

GD

P G

row

th (S

SAR,

%)


Japan China South Korea

UNEMPLOYMENT UP SHARPLY IN THE U.S.; LESS SO EUROPE2020 unemployment rate forecast by CBRE House-View

Source: Oxford Economics, CBRE Research, April 2020.

3.8

15.2

11.6

8.7

4.2

6.0 6.3 6.1

10.4

12.5 13.1 12.8

0

2

4

6

8

10

12

14

16

18

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

Une

mpl

oym

ent

Rate

(%)

2019 2020

United States United Kingdom Italy

U.S. UNEMPLOYMENT RATE

Source: BLS, CBRE Research, April 2020.

0

2

4

6

8

10

12

14

1620

00Q

120

00Q

320

01Q

120

01Q

320

02Q

120

02Q

320

03Q

120

03Q

320

04Q

120

04Q

320

05Q

120

05Q

320

06Q

120

06Q

320

07Q

120

07Q

320

08Q

120

08Q

320

09Q

120

09Q

320

10Q

120

10Q

320

11Q

120

11Q

320

12Q

120

12Q

320

13Q

120

13Q

320

14Q

120

14Q

320

15Q

120

15Q

320

16Q

120

16Q

320

17Q

120

17Q

320

18Q

120

18Q

320

19Q

120

19Q

320

20Q

120

20Q

320

21Q

120

21Q

320

22Q

120

22Q

320

23Q

120

23Q

3

Une

mpl

oym

ent

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

Une

mpl

oym

ent

Rate

Cha

nge

(%)

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

1989

Q1

1990

Q1

1991

Q1

1992

Q1

1993

Q1

1994

Q1

1995

Q1

1996

Q1

1997

Q1

1998

Q1

1999

Q1

2000

Q1

2001

Q1

2002

Q1

2003

Q1

2004

Q1

2005

Q1

2006

Q1

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

(%) Unemployment Rate All-Property Vacancy RateForecast 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

$Tril

lions

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

Fina

ncia

l Stre

ss In

dex

U.S. PRIVATE SECTOR WELL POSITIONED PRIOR TO COVID-19U.S. private domestic sector balance (income – outgoings)

Source: FRED, CBRE Research, Q1 2020.

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

1967

1968

1969

1970

1971

1972

1973

1974

1975

1976

1977

1978

1979

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

Recession Private Domestic Sector Balance (4Q-Moving Average)

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

2001

Q3

2002

Q1

2002

Q3

2003

Q1

2003

Q3

2004

Q1

2004

Q3

2005

Q1

2005

Q3

2006

Q1

2006

Q3

2007

Q1

2007

Q3

2008

Q1

2008

Q3

2009

Q1

2009

Q3

2010

Q1

2010

Q3

2011

Q1

2011

Q3

2012

Q1

2012

Q3

2013

Q1

2013

Q3

2014

Q1

2014

Q3

2015

Q1

2015

Q3

2016

Q1

2016

Q3

2017

Q1

2017

Q3

2018

Q1

2018

Q3

2019

Q1

2019

Q3

US Household Debt-Service RatioAdvanced 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

Dol

lar

inde

x (1

/1/2

015=

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

2008

Q1

2008

Q3

2009

Q1

2009

Q3

2010

Q1

2010

Q3

2011

Q1

2011

Q3

2012

Q1

2012

Q3

2013

Q1

2013

Q3

2014

Q1

2014

Q3

2015

Q1

2015

Q3

2016

Q1

2016

Q3

2017

Q1

2017

Q3

2018

Q1

2018

Q3

2019

Q1

2019

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


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.

CENTRAL BANKS PUMP UP THEIR BALANCE SHEETSMonetary measures undertaken by central banks to date

Source: CBRE Research, April 2020.

13.5

5.4

21.4

7.4

0.6 1.40.4

0

5

10

15

20

25

30

0

500

1,000

1,500

2,000

2,500

3,000

US EU Canada UK China Australia Japan

US$

Bill

ions

Total Balance Sheet Expansion % of GDP (rhs) (%)

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

HOSPITALITY TICKS UP IN CHINAHotel occupancy compared

Source: CBRE Hotels Research, STR, April 2020.

0

10

20

30

40

50

60

70

80

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18

Occupancy Level (%)

Months of Impact

China History China Forecast U.S. History U.S. Baseline

US 3/7China 1/16

US 3/14China 1/21

China 2/8

China 4/11

US 4/15

US 6/15

US 4/18

Baseline Recovery Scenario

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

hang

e (%

)

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

2010

Q2

2010

Q3

2010

Q4

2010

Q1

2011

Q2

2011

Q3

2011

Q4

2011

Q1

2012

Q2

2012

Q3

2012

Q4

2012

Q1

2013

Q2

2013

Q3

2013

Q4

2013

Q1

2014

Q2

2014

Q3

2014

Q4

2014

Q1

2015

Q2

2015

Q3

2015

Q4

2015

Q1

2016

Q2

2016

Q3

2016

Q4

2016

Q1

2017

Q2

2017

Q3

2017

Q4

2017

Q1

2018

Q2

2018

Q3

2018

Q4

2018

Q1

2019

Q2

2019

Q3

2019

Q4

2019

Q1

2020

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

Volu

me

Inde

x (J

anua

ry=

100)

EMEA (2020)

EMEA (5-Year Ave.)

20

40

60

80

100

120

140


Americas (2020)

Americas (5-Year Ave.)

20

40

60

80

100

120

140


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

Sqm

Beijing Shanghai Shenzhen Wuhan

GLOBAL RENT AND CAPITAL VALUE LIKELY TO FALL Global GDP, rent and capital value indices (t=Q4 2019)


75

80

85

90

95

100

105

110

115

120

t-4 t t+4 t+8 t+12 t+14

Inde

x

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)


75

80

85

90

95

100

105

110

115

t-4 t t+4 t+8 t+12

Inde

x

GDP Great FinancialCrisis (GFC)

Pre-GFC GDPforecast (Jan 2008)

Global All-PropertyRent (GFC)

Global All-PropertyCapital Value (GFC)

RISING SPREAD PROTECT CAP RATES TO A CERTAIN EXTENT Global all-property yield over weighted bond yield

Source: CBRE Research, Q1 2020.

-4

-2

0

2

4

6

8

10

12

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

(%) Spread Global all-property yield Global bond rate

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

100.7

707580859095

100105110115120125130135

Historical Data 2-Qtr Projection 1 Year Recovery GFC

Beginning of Recessions

U.S. INDUSTRIAL LEASING VOLUME – 1 YR. RECOVERY & SHIFTMinimal effects from second wave of virus. Rapid bounce back in economy and property market.

Note: Indexed from 2 years before a recession (Q4 2005 for GFC, Q4 2017 for current recession)Source: CBRE Research, CoStar, Q2 2020.


101.4

40

50

60

70

80

90

100

110

120

130Historical Data 2-Qtr Projection 2 Year Recovery GFC

U.S. OFFICE LEASING VOLUME – 2 YR. RECOVERYBase case. Second wave controlled with mass testing, but unemployment slower to fall due to economic disruption.


60.3

20

40

60

80

100

120

140Historical Data 2-Qtr Projection 3 Year Recovery GFC


U.S. RETAIL LEASING VOLUME – 3 YR. RECOVERY & DOWNSHIFTMinimal effects from second wave of virus. Rapid bounce back in economy and property market.


• 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 DOWNSIDE

• 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

RISKS TO THE UPSIDE

• 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

BOTTOM LINE

• 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

LONGER-TERM OUTLOOK

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

DR. RICHARD BARKHAMGlobal Chief Economist & Head of Americas Research CBRE Research +1 617 912 [email protected]

Wei LuoGlobal Associate Director Economics & Capital Markets CBRE Research +1 212 984 [email protected]

Daniel ChangGlobal Research Analyst Economics & Capital Markets CBRE Research +1 617 912 [email protected]

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