Earnings Call, Conference Presentation, Fireside Chat, Interview
The State of the Real Estate Market
- Global infection growth rates and specific regional outbreaks in the U.S., Europe (including Germany, Austria, Italy, and Spain), and New York City (approx. 21.2% rate, <1% fatality) are expected to have peaked or are in the process of peaking.
- Lockdowns in select European regions may relax to allow school reopenings, while the U.S. is projected to see U.S. housing starts decline from 1.47 million in Q1 to 1.13 million in Q2.
- Investment forecasts anticipate a relatively shorter market dislocation period compared to the 2.5 years post-2008, though public REIT market volatility may persist with valuations at March 31st becoming stale and further declines expected by June 30th.
- Cap rates are forecast to widen due to risk premiums and capital scarcity before eventually trending downward with interest rates, while retail collections for top-tier malls are expected to remain low at 5% to 15% through the next month.
- The retail sector faces an accelerated decline with the demise of lower-tier malls hastened by existing over-retailing, whereas the industrial sector is projected to be a net winner driven by e-commerce growth, tight occupancy, and a quick fill of "last mile" logistics shortages.
- Office sector occupancy and rents face downward pressure due to remote work shifts and small tenant failures, potentially triggering short-term densification for social distancing, while multifamily demand may rise as potential homebuyers face wealth erosion and credit difficulties.
- The hospitality sector requires a clear health all-clear for recovery but faces a prolonged timeline, needing 42% to 45% occupancy to break even, while life science and technology sectors are expected to benefit from talent pool concentration in innovation hubs.
- A healthy debt market facilitated by government-sponsored entities like Fannie Mae and Freddie Mac is considered essential for industry recovery, with banks expected to eventually restore liquidity once asset performance visibility improves.
- Real estate capital is anticipated to shift toward locations with deep knowledge and innovation talent pools, while the "work from home" trend is expected to be adopted by the next generation, influencing long-term location preferences.