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  • Robin Santiago, CCIM

COVID-19 and its impact on the Economy & CRE

Updated: Mar 26


"We're living in some crazy times," is a text message that I sent to a client soon after I read the most recent Washington Post headline: Single-day U.S. fatalities exceed 100. At the moment, there are over 42,000 active cases in the U.S. and climbing.


Suffice to say that our priority at the moment isn't with commercial real estate transactions - right now, the priority should be to do everything that we can to contain and defeat this deadly virus and hopefully get back to some sense of normalcy. If that means that we have to sit at home and practice social distancing, or spend a few extra hours on our PS4’s then so be it.


Just in the last two weeks, the stock market cratered and erased almost 4 years worth of gains, the federal reserve dropped interest rates down to 0%, businesses (including those in the CRE industry) have halted all operations and only "essential businesses" are allowed to remain open. We're at a critical point in our nation's history and where we go from here really depends on the actions that we take over the course of the next few weeks and months.


So what does the economy and CRE industry look like today and what are "experts" predicting for the future? I've spent the last week participating in various webinars, listening to investor flash calls, and reading economic forecasts hoping to gain some confidence that our economy won't be left in ruins by the time this pandemic passes. So, here are a few blurbs from the experts:

  • Goldman Sachs and Morgan Stanley both agree that U.S. GDP could fall to -30% in the 2nd quarter which will likely drive the unemployment rate to 12.8% which are both astounding figures.

  • The International Monetary Fund expects the coronavirus pandemic to cause a worldwide recession that is as bad as the global financial crisis but will rebound sharply in 2021 (I'll take any bit of good news at this point).

  • CBRE is expecting GDP to be -6% in Q2 (I guess that's better than -30%) with a recovery that will resemble a Nike swoosh like trajectory shortly thereafter. Hospitality and retail sectors to be the most heavily impacted. Industrial and multi-family properties to perform quite well long-term. Over 50% of CBRE’s Capital Markets teams have seen their clients delay bringing deals to the market and over 70% expect more disruption in the next 30 days. Of the deals currently being worked on (in contract), 2/3 of buyers have asked for a price reduction of 5%. Overall, the firm remains optimistic that markets will bounce back much faster than after the global financial crisis or after 9/11.

  • Cushman & Wakefield is expecting a brutal Q2 with -10.8% in GDP with a rebound starting in Q3 (3.2% GDP) and a huge rally in Q4 (14.5% GDP) which is great to hear but fairly hard to believe from our vantage point today, given the circumstances.

  • SVN International believes that the effects of COVID-19 will be relatively short-lived but markets in the future will demand a new approach to the workplace (possibly less open office layouts, which ironically has been the popular trend over the last 5 years) and an increase demand for healthcare real estate.

  • Marcus & Millichap put things into perspective by comparing the current 30% decline in the stock market to other market corrections over the last 100 years. (Here's a hint: it's not the worst....not even close).

Putting the variance in opinion between these organizations aside, one thing is certain: our leaders in government (specifically Congress) must act swiftly to pass a stimulus package that will infuse capital into the businesses and individuals that badly need it. The majority of the US working population is living from paycheck to paycheck (a sad reality) and are desperately seeking help from their political leaders.


We shall see where the CRE market will be in 6 months, a year, or 18-months from now. I am optimistic (cautiously) that a recovery will occur but I'm not as convinced it will be sharp and sudden as some pundits have claimed. Having personally experienced the global financial crisis that left the CRE industry in tatters, I am preparing myself for a long period of recovery. It will get ugly before it gets any better but hey, at least for now we have our health. For now.


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