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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
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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 (%)
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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.
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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%
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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
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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
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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
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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
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ECONOMY
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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
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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
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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.
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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.
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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
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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
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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
(%)
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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
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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%
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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
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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
Real
GD
P G
row
th (%
)
Pre-COVID19 Forecast Revised Forecast
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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
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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 (%)
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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
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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
0102030405060
2020Q1
2020Q2
2020Q3
2020Q4
2020Q1
2020Q2
2020Q3
2020Q4
2020Q1
2020Q2
2020Q3
2020Q4
Real
GD
P G
row
th (S
SAR,
%)
Pre-COVID19 Forecast Revised Forecast
United States United Kingdom Canada
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QUARTERLY ANNUALIZED PROFILE OF GROWTH2020 annualized q-o-q GDP growth forecast by CBRE House-View
Source: CBRE House-View, April 2020.
-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,
%)
Pre-COVID19 Forecast Revised Forecast
Germany France Italy
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QUARTERLY ANNUALIZED PROFILE OF GROWTH2020 annualized q-o-q GDP growth forecast by CBRE House-View
Source: CBRE House-View, April 2020.
-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,
%)
Pre-COVID19 Forecast Revised Forecast
Japan China South Korea
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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
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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
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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
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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
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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
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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
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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)
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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)
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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
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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)
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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)
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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)
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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
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POLICY
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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)
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-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.
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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) (%)
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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
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GREEN SHOOTS
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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
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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
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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
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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
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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)
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TURNING TO REAL ESTATE
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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)
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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
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.)
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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
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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
Inde
x
April GDP Forecast
January GDP Forecast
Global All-Property Rent(COVID-19)
Global All-Property CV(COVID-19)
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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
Inde
x
GDP Great FinancialCrisis (GFC)
Pre-GFC GDPforecast (Jan 2008)
Global All-PropertyRent (GFC)
Global All-PropertyCapital Value (GFC)
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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
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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
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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.
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Beginning of Recessions
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.
Note: Indexed from 2 years before a recession (Q4 2005 for GFC, Q4 2017 for current recession)Source: CBRE Research, CoStar, Q2 2020.
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60.3
20
40
60
80
100
120
140Historical Data 2-Qtr Projection 3 Year Recovery GFC
Beginning of Recessions
U.S. RETAIL LEASING VOLUME – 3 YR. RECOVERY & DOWNSHIFTMinimal 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.
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• 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
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• 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
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• 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
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• 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
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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]