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Commercial Real Estate Markets Update (April 2020)

Below is CBRE’s assessment of the impacts on the CRE industry as a direct result of COVID-19 in a thorough research piece released on March 27, 2020.

The prediction is that the negative effects will peak at the end of Q2 and we will see a ~7% decline in GDP, the largest single regression in US history. A Q3 jobs report should show an unemployment rate of 6.1%, but a quick recovery will decrease that number considerably in Q3 and through the rest of 2020. Fiscal policy plays a big part in the economy’s rebound, taming the stock market volatility through Q2 and allowing for the liquidity that companies need to deliver a strong Q3.

Below are key takeaways from the following report:

COVID-19 Exonomic Impact & Sector Update – CBRE – Report Link

Download the PDF version of this report here:

COVID-19 Economic Impact & Sector Update

CBRE

    • Implications for Lodging
      • Change in overall occupancy forecasted to be -29.3% in 2020; was 0.0% in 2019
      • Change in Average Daily Rate (ADR) -10.8% in 2020
      • Not expected to reach EOY 2019 levels in occupancy or ADR until early 2023
      • Cities with the highest ADR will see the highest decline
    • Implications for Retail
      • Immediate impact – avoidance of physical stores
      • Deferred Impact – higher unemployment decreases consumer confidence; non-essential spending will see considerably less demand until the economy stabilizes
      • A movement towards contactless payment systems
      • Higher e-commerce penetration in grocery shopping
    • Implications for Office
      • The shock to the office market will recover quickly, but the impact won’t be serious
    • Implications for Multifamily
      • Expect a dip in rent growth and occupancy while employment uncertainty subsides
      • Housing policy/stimulus will play a large role in easing some of that uncertainty
      • Preferences for city-living will remain
      • Return to long-run equilibrium in 2023
    • Implications for Industrial
      • E-commerce gaining significant share in the future
      • Decreased manufacturing activity
      • Possible push to start carrying higher inventory levels
      • Vacancy spike is imminent