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2nd Quarter 2020 Results

• Over 1,000 Investment Sales Transactions
• Over $5B Investment Sales Volume
• Nearly 400 Financing Transactions
• Over $1B Financing Volume

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Regional economic reports assessing the impact of the coronavirus and the ongoing recovery throughout the country. These reports break down general property in asset classes including Apartment, Retail, Office and Industrial, as well as things to consider into the future.

• Austin
• Detroit
• Inland Empire
• Los Angeles
• Minneapolis-St Paul
• Orlando
• Salt Lake City
• San Diego
• Tampa

What’s a K-Shaped Economic Recovery and How Does it Impact Real Estate Investors?

• Recovery headed toward divergent outlook – “K-Shape” with some sectors reviving & others dragging
• Trend emerging in employment data:
  – Positive Momentum: Financial Services, Professional & Business Services, Manufacturing, Construction, Education, Health Services and even Retail
  – Stagnant: Restaurants, Hotel/Accommodations, and Entertainment
• Wide impact by geography too – Reliance on tourism and ability to reopen economies are deciding factors
  – Positive Momentum: Midwestern states and much of the South
  – Stagnant: New York, Massachusetts, California, Nevada and Hawaii
• These trends influence the commercial real estate outlook – Varied impact by property type
• Even within property types, wide spectrum by subtype and local market/submarket/neighborhood drivers
• Current investment landscape is too dynamic and diverse to generalize – Don’t paint with a broad brush
• Review investors individual assets and tie local market knowledge to their investments

Active Lending Climate Opens New Opportunities for Investors

• Although commercial real estate transaction activity has been down significantly from last year, about 60% in Q2 2020, activity has begun to revive
• Modest but steady job recovery and strong retail sales will produce an economic bounce in the third quarter
• Banks have emerged as the leading source of debt capital
• Lending is broadly available for Industrial, Medical Office, and Multifamily properties
• Lending for Office, Self-Storage, and Seniors Housing varies on a case by case basis
• Hotels and Shopping Centers continue to face a tighter lending climate
• The wide yield spread and current debt liquidity create unique opportunities for strong levered yields,its second widest level on record
• Unique opportunity for investors exists today as a result of low interest rates, and stable cap rates, the yield spread has opened to or near record levels
• Wide spread and market liquidity create strong yield market opportunity
• Competition in the future could ramp up and create cap rate pressure for the most in-demand property types

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• Results of 2H 2020 investor survey just came in and provide unique insight into confidence levels
• Overall, severe economic volatility dropped investor sentiment – Results still strong compared to 08/09
• Market fragmentation is more pronounced than ever – Buy-side sentiment mixed by property type
• Industrial remains a standout followed by Seniors Housing, Apartment and Office
• Retail was down entering pandemic and remains unfavorable followed by Self-Storage and Hotel
• The record-low drop in interest rates remains the primary driver encouraging investment activity
• Survey results indicate we could see a recovery in sales activity in 2H 2020 and likely won’t see broad-based discounting

 

• Consumer spending growth normalizes in August
• Reopening activity evident in retail sales.
• Retail fundamentals still fail to reflect market reality.

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