2020 Economic Update for Commercial Real Estate Professionals
K.C. Conway, MAI, CREChief Economist, CCIM Institute
Director of Research, Alabama Center for Real Estate
MODERATOREddie D. Blanton, CCIM
2020 President, CCIM Institute
“It is not given to human beings –happily for them, for otherwise life
would be intolerable – to foresee or to predict to any large extent the
unfolding course of events.”Winston Churchill
Source: https://www.cbo.gov/system/files/2020-04/56317-CBO-MBR.pdf
Congressional Budget Office Budget Review Report
Source: Real Capital Analytics
U.S. Property Sector Exposure by Lender Group
V-Shaped RecessionsThe recession of 1990 to 1991 and the recession of 2001—both of which only lasted eight months—were considered V-shaped recessions.
U-Shaped RecessionsThe recession from 1971 to 1978—when both unemployment and inflation were high for years—is considered a U-shaped recession.
W-Shaped RecessionsThe recession of 1980, that double-dipped in 1981 and 1982, is a great example of a W-shaped recession.
L-Shaped RecessionsThe Japanese recession that began in the early 1990s is considered anL-shaped recession.
VThe Shape of the Recession
LWU
Source: Real Capital Analytics
Commercial Real Estate Value ImplicationsRange of Apartment Cap Rates
5.5 5.7 5.9 6.1 6.3 6.5 6.7 6.9 7.1
Perc
ent C
hang
e in
NO
I
0% 0% -4% -7% -10% -13% -16% -18% -21% -23%
-2% -2% -6% -9% -12% -15% -17% -20% -22% -24%
-4% -4% -8% -11% -14% -16% -19% -21% -24% -26%
-6% -6% -10% -13% -16% -18% -21% -23% -25% -27%
-8% -8% -12% -15% -17% -20% -22% -25% -27% -29%
-10% -10% -13% -16% -19% -22% -24% -26% -29% -31%
-12% -12% -15% -18% -21% -23% -26% -28% -30% -32%
-14% -14% -17% -20% -23% -25% -27% -30% -32% -34%
-16% -16% -19% -22% -25% -27% -29% -31% -33% -35%
-18% -18% -21% -24% -26% -29% -31% -33% -35% -37%
-20% -20% -23% -26% -28% -30% -33% -35% -36% -38%
-22% -22% -25% -28% -30% -32% -34% -36% -38% -40%
Areas in grey are the combinations needed to drive a 22% decline in asset values.
85
90
95
100
105
110
2015 2016 2017 2018 2019 2020
Small Business Optimism IndexBased on 10 survey indicators, seasonally adjusted
Optimism Index
Source: https://www.nfib.com/sboi
Small Business OptimismAbrupt Turn in Small Business Optimism Ends 39-Month Historic Run
Index Component Net %Change
from Feb.Plans to Increase Employment 9% -12Plans to Make Capital Outlays 21% -5Plans to Increase Inventories -3% -5Expect Economy to Improve 5% -17Expect Real Sales Higher -12% -31Current Inventory -2% 2Current Job Openings 35% -3Expected Credit Conditions -4% -3Now a Good Time to Expand 13% -13Earnings Trends -6% -2
NFIB Small Business Economic Trends
Transportation and Logistics Indicators
North American Freight Rail Traffic & U.S. Rail Intermodal Units Reportshttps://www.aar.org/
American Trucking Associations Truck Tonnage Index https://www.trucking.org/economics-and-industry-data
The Cass Freight Index®https://www.cassinfo.com/freight-audit-payment/cass-transportation-indexes/cass-freight-index
Retail e-Volution
Source: https://www.visualcapitalist.com/shoppers-buying-online-ecommerce-covid-19/
Impact of COVID-19 Across Property Sectors
Adaptive Reuse Opportunities
FOR ADDITIONAL RESOURCES
CCIM Institute's Coronavirus (COVID-19) Resources and Guidance www.ccim.com/covid19
