STRONG RECOVERY ON TRACK, OLD RISKS RETURN .
12 APRIL 2021
Dr. Richard Barkham Global Chief Economist & Head of Americas Research CBRE Research
UNITED STATES
U.S. HITS PEAK GROWTH IN 2021 BASED ON STIMULUS Annual GDP Growth Rate
U.S.
Euro Area
U.K.
8
6 4
2
Percent
0 -2 -4 -6 -8 -10 -12 2018 Source: CBRE House-View, April 2021.
2019
2020
2021
2022
2023
BACK TO FULL EMPLOYMENT IN 2021
Real GDP growth and headline unemployment rate (%) 2021 Full-Year GDP Growth Forecast
2021 Unemployment Rate
Oxford Economics
7.2
Oxford Economics
4.6
Goldman Sachs
7.7
Goldman Sachs
4.1
WSJ Concensus
5.9
WSJ Concensus
5.0
Moody's
4.9
Moody's
4.8
Wells Fargo
7.6
Wells Fargo
4.7
CBRE
6.7
CBRE
4.6
IHS Markit
5.9
IHS Market
4.7
6.6 Average Source: WSJ Econ Survey, CBRE Research, April 2021.
4.6 Average
SUBSTANTIAL JOB OPENINGS REMAIN UNFILLED Percent of jobs openings not able to fill right now 45% 40% 35% 30% 25% 20%
15% 10% 5% 0% 2000
2002
2004
Source: NFIB, CBRE Research, March 2021.
2006
2008
2010
2012
2014
2016
2018
2020
AND BUSINESS CONFIDENCE IS HIGHLY ROBUST Business confidence index, Composite Markit PMIs 65
Manufacturing US
Euro Area
UK
China
Japan
Index>50 = Expansion
60
70
Services US
Euro Area
UK
China
Japan
60
55 50 50 40 45 30
40 35
20
30
10
25 Feb-19
Aug-19
Feb-20
Aug-20
Feb-21
Source: Markit Business Survey, Macrobond, CBRE Research, March 2021.
0 Feb-19
Aug-19
Feb-20
Aug-20
Feb-21
DESPITE IMPROVEMENT COVID REMAINS THE KEY THREAT
U.S. Daily new cases & deaths, and total currently hospitalized (7-day moving average) New confirmed cases per day (lhs)
Currently hospitalized (lhs)
Deaths per day (rhs)
300,000
6,000
250,000
5,000
200,000
4,000
150,000
3,000
100,000
2,000
50,000
1,000
0 Mar-20
0 Apr-20
May-20
Jun-20
Jul-20
Aug-20
Sep-20
Oct-20
Nov-20
Source: US Dept. of Health and Human Services, Oxford University, CBRE Research, 12 Apr 2021.
Dec-20
Jan-21
Feb-21
Mar-21
CASES ARE RISING SHARPLY IN NORTHERN STATES Hospital patients per 100,000 (7-day average) 800
Patients per 100,000 (7-Day MA)
700 600 500 400 Michigan 300
New York New Jersey
200 Florida 100 0 Nov-20
Dec-20
Jan-21
Source: US Dept of Health and Human Services, FT, CBRE Research, 12 Apr 2021.
Feb-21
Mar-21
Apr-21
IT’S THE YOUNGER DEMOGRAPHIC IN COLDER CLIMATES Michigan vaccination rate and hospitalization rate since Mar 1 Vaccination rate (%)
Increase in hospitalizations since Mar 1 (%) 18-29
30-39 40-49 50-59 60-69 70-79 80+ 50
40
30
20
10
0
0
Source: Michigan Health and Hospital Association, FT, CBRE Research, 9 Apr 2021.
200
400
600
800
1,000
VIRUS-HIT SECTORS ARE IMPROVING
Passengers at airport security, YoY % 7-day moving average -40%
Chart compares 2021 data to 2019 from March 1, 2021 onwards
Y-o-Y Change (%)
-50%
-60%
-70%
-80%
-90%
-100% Mar-20
Apr-20
May-20
Source: TSA, CBRE Research, 6 Apr 2021.
Jun-20
Jul-20
Aug-20
Sep-20
Oct-20
Nov-20
Dec-20
Jan-21
Feb-21
Mar-21
THE LEISURE SECTOR IS BOUNCING BACK
Y-o-Y change in OpenTable restaurant booking (7-Day Moving Average) California
40%
New York
Texas
Florida
Michigan
% Change from 2019, 7-Day MA
20% 0% -20% -40% -60% -80% -100% Sep-20
Oct-20
Source: OpenTable, 6 Apr 2021.
Nov-20
Dec-20
Jan-21
Feb-21
Mar-21
REITS HAVE GAINED SUBSTANTIALLY IN 2021 – ALL SECTORS! U.S. REIT Index by sectors 140 120
Industrial Self Storage
100
Health Care Apartments
80 60
Office Strip Centers Retail
40
Hotels Malls
20
Source: Wilshire Associates Incorporated, CBRE Research, 9 Apr 2021.
RISK SPREADS DANGEROUSLY LOW
U.S. BBB-rated corporate bond yield spread over 10-year treasury (%)
BBB-rated Corporate Bond Yield
10-Year Treasury Yield
(Bps)
Spread (rhs)
14
800
12
700
10
600
8
500
6
400
4
300
2
200
0 2007
100 2008
2009
2010
2011
Source: Macrobond, CBRE Research, 11 Apr 2021.
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
EXPECT A LOT OF NOISE ABOUT INFLATION THIS WEEK Consumer Price Index (Y-o-Y Change, %) US
4.0
EU
UK
Japan
Y-o-Y Change (%)
3.0 2.5% 2.0
1.0
0.0
-1.0
-2.0 2012
2013
2014
2015
Source: National Sources, Macrobond, CBRE Research, 2020.
2016
2017
2018
2019
2020
UKRAINE
PAGE HEADING HEADING
Second level • Third level – Fourth level • Fifth level
TAIWAN
2021 2022
Source: CBRE Research, CBRE Econometric Advisors Q4 2020. 2023 2021-2023 cumulative
Memphis
Atlanta
Las Vegas
Miami
San Antonio
Toledo
Portland
Rents down
Cleveland
Raleigh
Sacramento
Orlando
Jacksonville
Tampa
Hartford
Salt Lake City
New York
Denver
Chicago
Boston
Detroit
Fort Worth
Los Angeles
Seattle
Philadelphia
Dallas
Phoenix
Austin
San Francisco
Houston
San Diego
San Jose
UNITED STATES OFFICE – STILL A BIT FROZEN
3-Year Office Downtown Rental Forecast Rents up
15%
10%
5%
0%
-5%
-10%
-15%
-20%
M&A ACTIVITY SUGGEST CAPITAL MARKETS ACTIVITY ABOUT TO SURGE Global CRE Capital Flows and M&A Deal Value(USD Billions, TTM) 1,400
4,500 Global CRE Capital Flows (TTM, LHS)
1,200
Global M&A Deal Value (TTM, RHS) 4,000 3,500 3,000
800
2,500
600
2,000
400
1,500 1,000
200 0
Source: CBRE Research, Q4 2020.
500 0
USD Billions
USD Billions
1,000
THE DOLLAR IS WEAK – U.S. ASSETS ARE CHEAP U.S. Nominal Trade-weighted Dollar Index 130
120
110
100
90
80 2007
2008
2009
2010
2011
2012
2013
Source: Census Bureau, Macrobond, CBRE Research, 12 Apr 2021.
2014
2015
2016
2017
2018
2019
2020
2021
PAGE HEADING HEADING
Second level • Third level – Fourth level • Fifth level
EUROPE
EUROPE PEAKS OUT IN 2022 Annual GDP Growth Rate
U.S.
Euro Area
U.K.
8
6 4
2
Percent
0 -2 -4 -6 -8 -10 -12 2018 Source: CBRE House-View, April 2021.
2019
2020
2021
2022
2023
NEW VARIANTS AND SLOW VACCINE ROLL OUT Daily new cases in 7-day moving averages 70,000 60,000
Number of Cases
U.K. 50,000 40,000 France
Spain 30,000
Italy
20,000
Germany
10,000 0 0
25
50
75
100
125
150
175
200
225
250
275
Days Since Daily Increase Exceeds 100 Source: CBRE Research, University of Oxford, COVID Tracking Project, Macrobond, 12 Apr 2021. Note: Number reported as a 7-day moving average.
300
325
350
375
400
425
450
EUROPE PLAYING CATCH UP IN RACE TO HERD IMMUNITY Share of population that has received at least one dose United States
Europe
United Kingdom
Percent of Population that Received One Dose
100 90 U.S. – July 70% Threshold reached
80 70
Herd Immunity range = 70%
60
U.K. – August Threshold reached
50
Europe – November Threshold reached
40 30 20 10 0 Jan-21
Forecast Feb-21
Mar-21
Apr-21
May-21
Jun-21
Jul-21
Aug-21
Source: Our World in Data, Macrobond, CBRE Research, 8 Apr 2021. *Note: Forecast for U.S. provided by NYT, Forecast for Europe and U.K. by GS Investment Research
Sep-21
Oct-21
Nov-21
VACCINE AVAILABILITY HAS SLOWED PROGRESS – NOT FOR MUCH LONGER Reported COVID-19 vaccine production capacity (billions of doses) 40 35
VLP
Billions of Doses
30
RNA (Moderna & Pfizer-BioNTech)
25
Replicating viral vector
20
Protein subunit (Novavax & Vector Institute)
15
Non-replicating viral vector (J&J and AstraZeneca-Oxford)
10
Live attenuated Inactivated (Sinopharm & Bharat Biotech)
5
DNA
0 Q4 2020 Source: UNICEF, 2021.
H1 2021
H2 2021
2022
2023
BUSINESS CONFIDENCE IN EUROPE RISING ANYWAYS Europe Business confidence index, Composite Markit PMIs Manufacturing
Services 70
70
Index > 50 = Expansion
Germany
France
Italy
60
60
50
50
40
40
30
30
20
20
10
10
0
0 Jan-19
May-19
Sep-19
Jan-20
May-20
Germany
United Kingdom
Sep-20
Jan-21
Source: Markit Business Survey, Macrobond, CBRE Research, March 2021.
Jan-19
May-19
France
Sep-19
Jan-20
Italy
May-20
United Kingdom
Sep-20
Jan-21
Source: CBRE Research, Q4 2020. 2021 2022 2023 2021-2023 cummulative
Stockholm
La Defense
Frankfurt
Warsaw
Paris (Northern Paris)
Edinburgh
Glasgow
Bristol
Madrid
Birmingham
Dusseldorf
Barcelona
Mild rental inflation
Vienna
Luxembourg City
Copenhagen
Istanbul
Prague
Helsinki
London (Docklands)
London (West End)
Manchester
Rotterdam
Brussels
Leeds
Bratislava
Marseille
The Hague
Munich
Utrecht
Rents down
Paris (CBD)
Dublin
Oslo
15%
Lyon
Paris (WC)
EUROPE OFFICE IN REASONABLE SHAPE
3-Year Office Prime Rental Forecast Rents up
10%
5%
0%
-5%
-10%
PAGE HEADING HEADING
Second level • Third level – Fourth level • Fifth level
ASIA PACIFIC
CHINA PEAKS IN 2021 – ALREADY TIGHTENING Annual GDP Growth Rate
U.S.
Euro Area
U.K.
Asia Pacific
China
8
Percent
3
-2
-7
-12 2018 Source: CBRE House-View, April 2021.
2019
2020
2021
2022
2023
INDIA REOPENING SEES SURGE IN CASES Daily new cases in 7-day moving averages 14,000
160,000 India (rhs)
Number of Cases
12,000
140,000 120,000
10,000
Philippines 100,000
8,000
80,000 6,000
60,000
Indonesia
4,000
40,000
Japan 2,000
Malaysia China
0 0
25
50
75
100
125
150
175 200 225 250 275 300 Days Since Daily Increase Exceeds 100
Source: CBRE Research, University of Oxford, COVID Tracking Project, Macrobond, 12 Apr 2021. Note: Number reported as a 7-day moving average.
325
350
375
400
425
450
20,000 0
APAC VACCINE ROLLOUT LAGS OTHER REGIONS Percent of population that received one dose Asia
% of population that received one dose
7
Japan
Malaysia
Indonesia
India
6 5 4 3 2 1 0 24/12/2020
7/1/2021
21/1/2021
4/2/2021
Source: Our World in Data, Macrobond, CBRE Research, 12 Apr 2021.
18/2/2021
4/3/2021
18/3/2021
1/4/2021
APAC AHEAD IN RETURN TO NORMALCY ANYWAY Retail, Transit, Workplace Average weighted by GDP
Americas
Change from Pre-Pandemic Levels
10
EMEA
APAC
0 -10 -20 -30 -40
-50 -60 -70 Feb-20
Mar-20
Apr-20
May-20
Jun-20
Jul-20
Source: Google Mobility Index, CBRE Research, 7 Apr 2021.
Aug-20
Sep-20
Oct-20
Nov-20
Dec-20
Jan-21
Feb-21 Mar-21
BUSINESS CONFIDENCE INDICATES ROBUST EXPANSION Business confidence index, Composite Markit PMIs Manufacturing
65
China
Japan
India
70
Australia
60
Index>50 = Expansion
Services China
Japan
India
Australia
60
55 50 50 40 45 30
40 35
20
30
10
25 Jan-19
May-19
Sep-19
Jan-20
May-20
Sep-20
Jan-21
Source: Markit Business Survey, Macrobond, CBRE Research, March 2021.
0 Jan-19
Jul-19
Jan-20
Jul-20
Jan-21
APAC OFFICE REASONABLY GOOD
3-Year Office Grade A Net Effective Rental Forecast Rents up
Rents down 20% 15% 10% 5% 0% -5% -10% -15%
2021 Source: CBRE Research, Q4 2020
2022
2023
2021-2023 cummulative
Sydney
Melbourne
Singapore
Perth
Ho Chi Minh City
Auckland
Brisbane
Taipei
Bangalore - ORR
Seoul
Hanoi
Manila Makati
Guangzhou
Beijing
Mumbai - ABD
Shenzhen
Shanghai
Tokyo
Hong Kong
-20%
CONCLUSIONS •
Global recovery remains on track
•
Likely 24 months of really strong growth, then a substantive easing
•
Property sentiment is improving everywhere, but will lag the economic cycle
•
Particularly in the office sector
•
Expect strong U.S. and Global capital markets activity
•
Geopolitical risks also bounce back
THANK YOU! PLEASE DON’T HESITATE TO CONTACT US. Daniel Chang Global Research Analyst Economics & Capital Markets CBRE Research +1 617 912 5254 daniel.chang@cbre.com
Wei Luo Global Associate Director Economics & Capital Markets CBRE Research +1 212 984 8153 wei.luo@cbre.com
Dr. Richard Barkham Global Chief Economist & Head of Americas Research CBRE Research +1 617 912 5215 richard.barkham@cbre.com
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 are subject 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 market circumstances. 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 views herein 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 CBRE or 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 the presenter 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