{"id":1004484472,"date":"2020-10-14T02:08:37","date_gmt":"2020-10-14T10:08:37","guid":{"rendered":"https:\/\/www.commercialsearch.com\/news\/?p=1004484472"},"modified":"2020-10-14T06:28:30","modified_gmt":"2020-10-14T14:28:30","slug":"mixed-forecast-ahead-for-cre","status":"publish","type":"post","link":"https:\/\/www.commercialsearch.com\/news\/mixed-forecast-ahead-for-cre\/","title":{"rendered":"Mixed Forecast Ahead for CRE"},"content":{"rendered":"
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Clockwise: Jeanette Rice, Douglas Poutasse, Suzanne Mulvee and Mary Ludgin. <\/p><\/div>\n

The real estate industry has seen its ups and downs throughout 2020 as a result of the coronavirus pandemic. While some sectors have had a steady positive performance, others have struggled to keep up. CBRE\u2019s Americas Head of Multifamily Research Jeanette Rice moderated the panel \u201cLearning in Real Time: Experts Share Their Forecasts for Real Estate in 2020-2022,\u201d which included insight from Heitman\u2019s Senior Managing Director & Director of Global Investment Research Mary Ludgin, GID\u2019s Senior Vice President, Research and Strategy Suzanne Mulvee, and BentallGreenOak\u2019s Managing Director, Head of Research and Strategy Douglas Poutasse. The group discussed their mixed views on what challenges await the real estate industry post-pandemic, as well as the biggest impacts they have seen this year.<\/p>\n

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READ ALSO<\/strong>: COVID-19\u2019s Economic Outcome: A More Active Government Role?<\/a><\/p>\n

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Rice gave an overall economic overview, which showed GDP declining by 5 percent, a slight improvement compared to the last ULI Real Estate Economic Forecast<\/a>. Employment is looking at a tepid recovery, with an increase of 3.5 million jobs expected in the next two years. Unemployment will end the year at 8 percent and drop down to 6.6 percent in 2021, higher than the last survey results. Expectations of the Ten-Year will stay down in 2021.<\/p>\n

\u201cThe biggest difference is with unemployment. If we don\u2019t get a stimulus, unemployment improvement just stops. The original forecast was ending 2021 at 7.9 percent, but now the old forecast is off the table,\u201d explained Poutasse.<\/p>\n

There have been recent announcements of Fortune 500 and airline companies going through with massive layoffs. Ludgin also noted the local employment forecasts as well, which will keep the unemployment rate elevated. A large part of the unemployed workforce that has suffered is female. More women have left the workplace to take care of their kids during the pandemic, which has created a significant dent in the economy. Twenty-four percent of the workforce is 55 to 64, meaning boomers moving toward retirement, a process that’s being accelerated by these layoffs.<\/p>\n

\u201cIf those people leave, there is a natural deflation pool on the economy and the future\u2019s ability to grow,\u201d said Mulvee.<\/p>\n

Sector Outlook<\/strong><\/h2>\n
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Property type total returns<\/p><\/div>\n

Despite some setbacks, there are still parts of the industry that are performing well: Multifamily, industrial and life sciences. According to Ludgin, historic levels of supply have been delivered and are still being delivered during this time. \u201cMassive amounts of construction is being done in places where there once were none. Maybe the cities will come back with better prices, some people are going to the suburbs but not everyone,\u201d explained Ludgin.<\/p>\n

Looking toward the future, there is no rent growth decline at the end of the year, according to the survey, and if we look at vacancy rates, it shows they are elevated but not too high. The ULI Forecast doesn\u2019t have them coming down in 2021 and rent growth for the year is at -2.5 percent compared to the last recession. The report shows no rent growth for next year but an optimistic, historical average by 2022.<\/p>\n

\u201cI\u2019m modestly more optimistic than what\u2019s presented. There\u2019s going to be a grind here and we\u2019re going to have some rent issues. Apartments are going to have a tough couple of years because renters will have a tough couple of years,\u201d said Poutasse.<\/p>\n

For sectors that have faced more of a struggle, such as office and hospitality, there is still hope. Ludgin mentions that in 2021 more office tenants will shrink their space without knowing how important that square footage actually is. \u201cFirms will let suburban and downtown leases go not knowing they\u2019ll be back in five years,\u201d she explained. A big selling point for office at this time is its opportunity for conversion. This can include residential, hotel or retail.<\/p>\n

The other challenge comes with the influx of working from home. Offices are the hubs, and young people today will want to be in the office around where decisions and plans are made, noted Mulvee. Work from home has changed the need for office space and when things return back to normal there will be less of a chance that it will be for all five days, giving employees the chance for a better work-life balance. \u201cCommuting will become less of a grind, meaning people will tolerate longer commutes,\u201d she said.<\/p>\n

For hospitality, occupancy rates are not expected to go back to where they were before the coronavirus hit, but are there any bright spots in the sector? What\u2019s performing best at the moment is leisure-oriented or lower cost hotels. Worst performers are business or convention-oriented hotels, where there was a significant supply delivered before COVID-19 hit. \u201cLeisure is leading the recovery,\u201d said Ludgin.<\/p>\n

Pre-pandemic, the retail market was already oversupplied and over-demolished. “We finally killed hope,” said Mulvee. There was a huge amount of oversupply and a shift to e-commerce. The process of taking out the supply was very slow, as most strip malls and empty retail locations were left standing instead of being knocked down. “Owners used to have hope that someone would take their space and preserve the value of it, but now with the effects of COVID-19, we aren’t going to see that hope anymore,” explained Mulvee. However, this will open up the potential for interior space to be redeveloped, and better located retail centers will recover faster. <\/p>\n

There is still a role for some physical retail going forward, such as open-air regional malls and flexible retail space. Poutasse noted that unless the government gets involved, most of these empty centers will stay standing. “They are going to linger on forever except in booming areas where the government gets involved and cares to cut them down,” he said.<\/p>\n","protected":false},"excerpt":{"rendered":"

Industry experts share their expectations for the next two years at ULI\u2019s virtual fall conference. <\/p>\n","protected":false},"author":746,"featured_media":1004484688,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[21784,21782,21808,21751,22251,21748,21783,23891,21742,21747,21749],"tags":[46487,32789,33276,33395],"class_list":["post-1004484472","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-brokerage","category-development","category-featured","category-hotel","category-in-focus","category-industrial","category-investment","category-national","category-latest","category-office","category-retail","tag-bentallgreenoak","tag-cbre","tag-heitman","tag-urban-land-institute"],"acf":[],"yoast_head":"\nMixed Forecast Ahead for CRE - Commercial Property Executive<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.commercialsearch.com\/news\/mixed-forecast-ahead-for-cre\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Mixed Forecast Ahead for CRE\" \/>\n<meta property=\"og:description\" content=\"Industry experts share their expectations for the next two years at ULI\u2019s virtual fall conference.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.commercialsearch.com\/news\/mixed-forecast-ahead-for-cre\/\" \/>\n<meta property=\"og:site_name\" content=\"Commercial Property Executive\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/CPExecutive\" \/>\n<meta property=\"article:published_time\" content=\"2020-10-14T10:08:37+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2020-10-14T14:28:30+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2020\/10\/sky-414199_1920.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"800\" \/>\n\t<meta property=\"og:image:height\" content=\"620\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"IvyLee Rosario\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:creator\" content=\"@cpexecutive\" \/>\n<meta name=\"twitter:site\" content=\"@cpexecutive\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"WebPage\",\"@id\":\"https:\/\/www.commercialsearch.com\/news\/mixed-forecast-ahead-for-cre\/\",\"url\":\"https:\/\/www.commercialsearch.com\/news\/mixed-forecast-ahead-for-cre\/\",\"name\":\"Mixed Forecast Ahead for CRE - 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