DARIN MELLOTTDirector of Research, AmericasCBRE Research

GLOBAL ECONOMIC AND REAL ESTATE OUTLOOK.

IS THIS REAL LIFE?

7 MAY 2020

COVID-19 HAS DERAILED THE ECONOMIC CYCLEMajor epidemic events and the U.S. economic cycle

Source: BLS, Wikipedia, CBRE Research, April 2020.

Zika virus epidemicPlague Epidemic in India

Malaysia Nipah Virus Outbreak

SARS Outbreak in China and Hong Kong

Dengue Outbreak in Singapore

Dengue Outbreak in India and Pakistan

Zimbabwean Cholera Outbreak

West African Meningitis Outbreak

Swine Flu

Haiti Cholera Outbreak

Yellow Fever Outbreak in Sudan

Middle East Respiratory Syndrome Coronavirus

Western African Ebola Virus Epidemic

Kivu Ebola Epidemic

Measles Outbreak in Congo and Samoa

COVID-19 Outbreak Started

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

199

0

199

1

199

2

199

3

199

4

199

5

199

6

199

7

199

8

199

9

200

0

200

1

200

2

200

3

200

4

200

5

200

6

200

7

200

8

200

9

201

0

201

1

201

2

201

3

201

4

201

5

201

6

201

7

201

8

201

9

202

0

US Unemployment (%)

A TRUE GLOBAL SHOCKGlobal map of confirmed COVID-19 cases

REGION CONFIRMEDUnited States 1,175,782

Brazil 105,222

Canada 61,813

Spain 247,122

Italy 211,938

United Kingdom 191,453

France 168,693

Germany 165,914

Russia 145,268

Iran 98,647

Mainland China 82,884

India 46,437

Source: WHO, CDC, Johns Hopkins University, COVID19info.live, CBRE Research, 4 May 2020.

WITH LOCKDOWN THE ONLY OPTIONOutbreak development by country

Source: COVID19info.live, Macrobond, Oxford Economics, CBRE Research, 7 May 2020.

Country Lockdown Period Days Since Lockdown % of Total CasesInfected % of Total

Population

Spain Mar 14 – Present 52 7% 0.529%

United States Mar 19 – Present 47 33% 0.354%

Italy Feb 21 – Present 74 6% 0.350%

United Kingdom Mar 23 – Present 43 5% 0.282%

France Mar 17 – Present 49 5% 0.259%

Germany Mar 22 – Present 44 5% 0.198%

Russia Mar 30 – Present 36 4% 0.100%

Brazil Mar 24 – Present 44 3% 0.048%

China Jan 23 – Apr 07 76 3% 0.006%

THE CURVE IS ALMOST BENT IN THE DEVELOPED WORLD Cumulative number of confirmed cases, by number of days since 100th case

Source: Financial Times, CBRE Research, European Centre for Disease Prevention, Macrobond, 4 May 2020.

USA

Italy

China

Japan

South Korea

France

100

1,000

10,000

100,000

1,000,000

0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95 100 104

Num

ber

of C

ase

s

…EVERY 2 DAYS

…EVERY 3 DAYS

…EVERY WEEK

Days Since 100 Cases

SpainGermany

U.K.

CASES DOUBLE EVERY DAY

World

BUT IT HAS FURTHER TO GO IN THE DEVELOPING WORLDCumulative number of confirmed cases, by number of days since 100th case

Source: Financial Times, CBRE Research, European Centre for Disease Prevention, Macrobond, 4 May 2020.

India

Iran

ChinaBrazil

Algeria

100

1,000

10,000

100,000

1,000,000

0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95 100

Num

ber

of C

ase

s

…EVERY 2 DAYS

…EVERY 3 DAYS

…EVERY WEEK

Days Since 100 Cases

Turkey

Indonesia

Mexico

CASES DOUBLE EVERY DAY

World

WE ARE OVER THE PEAK IN FATALITIESDaily new deaths, by number of days since 3 daily deaths

Source: Financial Times, CBRE Research, European Centre for Disease Prevention, Macrobond, 7 May 2020.Note: Number reported as a 7-day moving average.

Days Since Third Death

United States

ChinaSouth Korea

ItalySpainGermany

UK

France

Japan

1

10

100

1,000

0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95

Num

ber

of D

eath

s

AND COUNTRIES BEGAN TO MOVE OUT OF FULL LOCKDOWNGDP-lead indicator and lockdown stage comparison (May 4)

SEMI-EASING LOCKDOWN GRADUAL OPENING RECOVERYLOCKDOWN

China

France Netherlands

USASpain

Australia

Austria DenmarkCzechNorway

Iran

Germany ItalyPortugalBelgiumSwitzerlandCanadaIndia

NO LOCKDOWN

• South Korea• Taiwan• Japan

Source: CBRE Research, 4 May 2020.

UKTurkey

Singapore

BrazilRussia

ECONOMY

VOLATILITY IS NOT OVER YETEquity market indexes (1/1/2020 = 100)

Source: S&P, FTSE, Deutsche Boerse, Nikkei, Shanghai Stock Exchange, Macrobond, CBRE Research, 7 May 2020.

60

65

70

75

80

85

90

95

100

105

110

Index

S&P 500 FTSE 100 Nikkei 225 Shanghai SE DAX 30

REIT PRICES HAVE RECOVERED SOONER THAN IN GFC U.S. REIT Index

Source: Wilshire Associates Incorporated, CBRE Research, 4 May 2020.

0

50

100

150

200

250

300

350

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

20

19

20

20

20

30

40

50

60

70

80

90

100

110

120

1/2 1/9 1/16 1/23 1/30 2/6 2/13 2/20 2/27 3/5 3/12 3/19 3/26 4/2 4/9 4/16 4/23 4/30

Industrial

Self Storage

Apartments

Office

Health Care

Strip Centers

Hotels

Retail

Malls

INDUSTRIAL RESILIENT; RETAIL AND HOTEL STRUGGLING U.S. REIT Index by sectors

Source: Wilshire Associates Incorporated, CBRE Research, 23 April 2020.

BUSINESS CONFIDENCE SINKS – PARTICULARLY SERVICESGlobal market business confidence index

35

40

45

50

55

60

Mar-17 Sep-17 Mar-18 Sep-18 Mar-19 Sep-19 Mar-20

Index

>50

= E

xpansi

on

Global

Composite Manufacturing Services

25

30

35

40

45

50

55

60

Apr-17 Oct-17 Apr-18 Oct-18 Apr-19 Oct-19 Apr-20

U.S.

Composite Manufacturing Services

Source: Markit Business Survey, Macrobond, CBRE Research, April 2020.

Source: EIA, ICE, CBRE Research, May 2020.

DEMAND SLUMP AND OVER-SUPPLY HAVE DEPRESSED OIL U.S. oil production and ICE brent oil price

0

20

40

60

80

100

120

140

4

6

8

10

12

14

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

USD

/Barr

el

Barr

els/

Day,

Mill

ions

U.S. Crude Oil Production (lhs) Cushing OK WTI Spot Price (rhs) Crude Oil ICE Brent Spot Price (rhs)

Q4

AMERICAN CONSUMER CONFIDENCE SLUMPSU.S. consumer sentiment index [monthly]

Source: University of Michigan, CBRE Research, April 2020.

-28

-34-26

-40

-30

-20

-10

0

10

20

30

40

Y-o

-Y C

hange

(%)

Key drivers of consumer sentiment:

+ Prime-Age Worker Wage Growth

− Unemployment Rate

− CPI Inflation

+ Stock Market Growth

Source: CBRE Research, Oxford Economics, April 2020.

RETAIL FELL THE MOST ON RECORD IN MARCHU.S. retail and food services sales y-o-y growth (excl. auto and gas)

-6

-4

-2

0

2

4

6

8

10

(%)

EUROPEAN CONSUMER CONFIDENCE DOWN; RETAIL ALSO WEAKEuropean consumer sentiment index [monthly]

Source: European Commission, CBRE Research, April 2020.

-25

-20

-15

-10

-5

0

Bala

nce

s (%

)

EU Euro Area

Largest falls in March:

- Germany

- Netherlands

- France

- Italy

COVID-19 WILL HAVE A PERMANENT IMPACT ON GLOBAL GDPGlobal real GDP index (Q4 2019 = 100)

Source: CBRE House-View, Oxford Economics, April 2020.

90

92

94

96

98

100

102

104

106

108

110

2019 2020 2021 2022

Q4 2

019

= 1

00

January GDP Forecast April GDP Forecast

8.1%

1.2%

COVID-19 IMPACT ON THE G7 ECONOMIES IN 20202020 annual GDP growth forecast (April)

Source: CBRE House-View, April 2020.

-4.9 -4.8 -4.7-5.4

-6.1

-8.1

-6.8

-10.0

-8.0

-6.0

-4.0

-2.0

0.0

2.0

4.0

USA Japan Germany UK France Italy Canada

Rea

l G

DP G

row

th (%

)

Pre-COVID19 Forecast Revised Forecast

EXPECTED REBOUND IN 20212021 annual GDP growth forecast (April)

Source: CBRE House-View, April 2020.

6.1

3.9

5.2 5.0

6.2

4.4

9.5

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

10.0

USA Japan Germany France UK Italy Canada

Rea

l G

DP G

row

th (%

)

Pre-COVID19 Forecast Revised Forecast

Source: BEA, Oxford Economics, CBRE Research, April 2020.

ASSUMED ECONOMIC IMPACT BY INDUSTRY U.S. annualized q-o-q GDP growth in Q2 2020 (%)

-100 -80 -60 -40 -20 0 20 40 60 80

Health care and social assistanceFederal government

State and local governmentAgriculture, forestry, fishing and hunting

InformationFinance and insurance

Management of companies and enterprisesProfessional, scientific, and technical services

Administrative and waste servicesMiningUtilities

Other services, except public administrationTotal GDP

Real estate and rental and leasingConstruction

ManufacturingTransportation and warehousing

Educational servicesRetail trade

Wholesale tradeArts, entertainment, and recreationAccommodation and food services

Annualized q-o-q GDP growth in Q2 2020 (%)

Source: CBRE Research, Oxford Economics, April 2020.

ASSUMED EMPLOYMENT IMPACT BY INDUSTRYU.S. employment change in Q2 2020

-7 -6 -5 -4 -3 -2 -1 0 1 2

Health care and social assistanceState and local government

Federal governmentMining

InformationManagement of companies and enterprises

Finance and insuranceReal estate and rental and leasing

Professional, scientific, and technical servicesAdministrative and waste services

Other services, except public administrationUtilities, transportation and warehousing

Educational servicesManufacturing

Wholesale tradeConstruction

Arts, entertainment, and recreationRetail trade

Accommodation and food services

Millions of Job Loss in Q2 from Q1

QUARTERLY ANNUALIZED PROFILE OF GROWTH2020 annualized q-o-q GDP growth forecast by CBRE House-View

Source: CBRE House-View, April 2020.

-5.1

-36.2

29.0

10.5

-6.6

-39.9

42.9

14.7

-0.8

-41.3

1.9

46.0

-50

-40

-30

-20

-10

0

10

20

30

40

50

60

2020Q1

2020Q2

2020Q3

2020Q4

2020Q1

2020Q2

2020Q3

2020Q4

2020Q1

2020Q2

2020Q3

2020Q4

Rea

l G

DP G

row

th (SS

AR,

%)

Pre-COVID19 Forecast Revised Forecast

United States United Kingdom Canada

U.S. UNEMPLOYMENT RATE

Source: BLS, CBRE Research, April 2020.

0

2

4

6

8

10

12

14

1620

00

Q1

20

00

Q3

20

01

Q1

20

01

Q3

20

02

Q1

20

02

Q3

20

03

Q1

20

03

Q3

20

04

Q1

20

04

Q3

20

05

Q1

20

05

Q3

20

06

Q1

20

06

Q3

20

07

Q1

20

07

Q3

20

08

Q1

20

08

Q3

20

09

Q1

20

09

Q3

20

10

Q1

20

10

Q3

20

11

Q1

20

11

Q3

20

12

Q1

20

12

Q3

20

13

Q1

20

13

Q3

20

14

Q1

20

14

Q3

20

15

Q1

20

15

Q3

20

16

Q1

20

16

Q3

20

17

Q1

20

17

Q3

20

18

Q1

20

18

Q3

20

19

Q1

20

19

Q3

20

20

Q1

20

20

Q3

20

21

Q1

20

21

Q3

20

22

Q1

20

22

Q3

20

23

Q1

20

23

Q3

Unem

plo

ymen

t Rate

(%

)

Forecast

BUT UNEMPLOYMENT RAPIDLY UP AND RAPIDLY DOWNPercent change in U.S. unemployment rate during recessions (t=quarter prior to recession)

Source: CBRE House-View, BLS, Bloomberg News, April 2020.

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

t t+2 t+4 t+6 t+8 t+10 t+12 t+14 t+16 t+18 t+20

Unem

plo

ymen

t Rate

Change

(%)

July 1981

July 1990

March 2001

December 2007

March 2020

UNEMPLOYMENT IS HIGHLY CORRELATED WITH VACANCYU.S. unemployment rate and all-property vacancy rate

Source: CBRE Econometric Advisors, CBRE House-View, April 2020.

2

4

6

8

10

12

14

16

198

9Q

1

199

0Q

1

199

1Q

1

199

2Q

1

199

3Q

1

199

4Q

1

199

5Q

1

199

6Q

1

199

7Q

1

199

8Q

1

199

9Q

1

200

0Q

1

200

1Q

1

200

2Q

1

200

3Q

1

200

4Q

1

200

5Q

1

200

6Q

1

200

7Q

1

200

8Q

1

200

9Q

1

201

0Q

1

201

1Q

1

201

2Q

1

201

3Q

1

201

4Q

1

201

5Q

1

201

6Q

1

201

7Q

1

201

8Q

1

201

9Q

1

202

0Q

1

202

1Q

1

(%) Unemployment Rate All-Property Vacancy Rate

Forecast unemployment and approximate implied vacancy

VACANCY INCREASE WILL VARY BY SECTORVacancy rates for major property types in the U.S.

Source: CBRE Econometric Advisors, Q1 2020.

0

5

10

15

20

25

(%) Office Industrial Retail Apartment 4 per. Mov. Avg. (Apartment)

Forecast

FED IS WORKING VERY HARD BEHIND THE SCENESTotal of federal reserve banks, by asset type, US $trillion

Source: Federal Reserve, CBRE Research, 17 April 2020.

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

US

$Tr

illio

ns

Treasury Security Holdings Agency MBS Holdings Agency Debt Holdings

COVID-19 Impact

SO YIELD SPREADS START TO COMPRESSU.S. A-rated corporate bond yield spread over 10-year treasury

Source: Macrobond, CBRE Research, 4 May 2020.

0

100

200

300

400

500

600

0

2

4

6

8

10

12

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

(Bps)(%)A-rated Corporate Bond Yield 10-Year Treasury Yield Spread (rhs)

SO YIELD SPREADS START TO COMPRESSU.S. BBB-rated corporate bond yield spread over 10-year treasury

Source: Macrobond, CBRE Research, 4 May 2020.

100

200

300

400

500

600

700

800

0

2

4

6

8

10

12

14

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

(Bps)(%)BBB-rated Corporate Bond Yield 10-Year Treasury Yield Spread (rhs)

FINANCIAL MARKET STRESS HAS EASED SIGNIFICANTLY St. Louis Fed Financial Stress Index (0=normal)

Source: FRED, CBRE Research, April 2020.

-2

0

2

4

6

8

10

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Fin

anci

al St

ress

Index

HOUSEHOLDS LESS LEVERAGED THAN PRIOR TO GFCHousehold debt-service ratio compared to household debt % of GDP

Source: BIS, CBRE Research, Q4 2019.

60

65

70

75

80

85

7.0

7.5

8.0

8.5

9.0

9.5

10.0

10.5

11.0

11.5

12.0

20

01

Q3

20

02

Q1

20

02

Q3

20

03

Q1

20

03

Q3

20

04

Q1

20

04

Q3

20

05

Q1

20

05

Q3

20

06

Q1

20

06

Q3

20

07

Q1

20

07

Q3

20

08

Q1

20

08

Q3

20

09

Q1

20

09

Q3

20

10

Q1

20

10

Q3

20

11

Q1

20

11

Q3

20

12

Q1

20

12

Q3

20

13

Q1

20

13

Q3

20

14

Q1

20

14

Q3

20

15

Q1

20

15

Q3

20

16

Q1

20

16

Q3

20

17

Q1

20

17

Q3

20

18

Q1

20

18

Q3

20

19

Q1

20

19

Q3

US Household Debt-Service Ratio

Advanced Economies, Household Debt % of GDP (2Y-Moving Average, rhs)

SHARP INCREASE IN THE VALUE OF DOLLARDollar value index (1/1/2015=100)

Source: Federal Reserve, FRED, Macrobond, CBRE Research, April 2020.

-5

0

5

10

15

20

25

30

35

95

100

105

110

115

120

125

130

135

Jan 2015 Jul 2015 Jan 2016 Jul 2016 Jan 2017 Jul 2017 Jan 2018 Jul 2018 Jan 2019 Jul 2019 Jan 2020

Dolla

r in

dex

(1/1

/20

15

=100

)

Spread (rhs) Trade-Weighted Dollar Index (lhs) Emerging Market Economies Dollar Index (lhs)

EMERGING MARKETS DEBT A POSSIBLE PROBLEMCore debt as percent of Emerging Markets GDP

Source: BIS, CBRE Research, Q4 2019.

0

20

40

60

80

100

120

140

160

180

200

20

08

Q1

20

08

Q3

20

09

Q1

20

09

Q3

20

10

Q1

20

10

Q3

20

11

Q1

20

11

Q3

20

12

Q1

20

12

Q3

20

13

Q1

20

13

Q3

20

14

Q1

20

14

Q3

20

15

Q1

20

15

Q3

20

16

Q1

20

16

Q3

20

17

Q1

20

17

Q3

20

18

Q1

20

18

Q3

20

19

Q1

20

19

Q3

Government Households Non-Financial Corporates

POLICY

COUNTRIES TURN TO FISCAL STIMULUS – MORE ON THE WAYFiscal stimulus packages in US$ Billions and Percent of GDP

Source: CBRE Research, Oxford Economics, April 2020.

10

33

22

5

14 14 16

39

14

5 210

10

20

40

60

80

100

0

500

1,000

1,500

2,000

2,500

(%)

US$

Bill

ions

Proposed Additional (lhs) Total % of GDP (rhs)

-1

0

1

2

3

4

5

6

7

8

US Canada EU UK Japan China US Canada EU UK Japan China

Pre-Crisis Post-Crisis Current

2007-08 Financial Crisis COVID-19

INTEREST RATES DOWN – BUT NOT HIGH TO START WITHCentral bank policy rate cuts

Source: CBRE Research, Macrobond, April 2020.

HONG KONG LEADS IN RECOVERYPercentage of city moving compared to usual on May 3

Source: Citymapper, CBRE Research, May 2020.

0 10 20 30 40 50 60

Washington DCMilan

New YorkRome

San FranciscoMadrid

ParisAmsterdam

PhiladelphiaBostonTokyo

ChicagoLondon

Los AngelesMexico City

SeoulMoscowSydneyBerlin

TorontoSingapore

SeattleHong Kong

100 = normal

May-3

Apr-19

GREEN SHOOTS

CHINA – SOCIAL FINANCING REBOUNDSTotal social financing (y-o-y growth)

Source: People’s Bank of China, CBRE Research, April 2020.

10.4%

10.7%

11.0%

11.3%

11.6%

Jan-19 Mar-19 May-19 Jul-19 Sep-19 Nov-19 Jan-20 Mar-20

Last two-year average

CHINA – TRADE SLOWLY RESUMINGChina container freight rate, composite (y-o-y)

Source: People’s Bank of China, CBRE Research, April 2020.

-8%

-4%

0%

4%

8%

12%

Jan-19 Apr-19 Jul-19 Oct-19 Jan-20

Last two-year average

DINING SERVICES – NO GREEN SHOOTS IN THE DEVELOPED WORLD YETY-o-Y change in OpenTable restaurant booking

Source: OpenTable, 3 May 2020.

-100

-80

-60

-40

-20

0

20

2/18 2/23 2/28 3/4 3/9 3/14 3/19 3/24 3/29 4/3 4/8 4/13 4/18 4/23 4/28 5/3

Y-o

-Y C

hange

(%)

United Kingdom Australia United States

U.S. TRAVEL STILL SEVERELY DEPRESSED TSA checkpoint travel numbers for 2020 and 2019

Source: TSA, 4 May 2020.

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3/1 3/8 3/15 3/22 3/29 4/5 4/12 4/19 4/26 5/3

Mill

ions

2020 2019 Weekly Mov. Ave. (2019)

TURNING TO REAL ESTATE

Source: CBRE Research, RCA (Americas), Q1 2020.

Q1 INVESTMENT VOLUME SURPRISED ON THE UPSIDEGlobal CRE sales transaction volume (into US$ using fixed exchange rate)

0

200

400

600

800

1,000

1,200

0

50

100

150

200

250

300

350

Q1

20

10

Q2

20

10

Q3

20

10

Q4

20

10

Q1

20

11

Q2

20

11

Q3

20

11

Q4

20

11

Q1

20

12

Q2

20

12

Q3

20

12

Q4

20

12

Q1

20

13

Q2

20

13

Q3

20

13

Q4

20

13

Q1

20

14

Q2

20

14

Q3

20

14

Q4

20

14

Q1

20

15

Q2

20

15

Q3

20

15

Q4

20

15

Q1

20

16

Q2

20

16

Q3

20

16

Q4

20

16

Q1

20

17

Q2

20

17

Q3

20

17

Q4

20

17

Q1

20

18

Q2

20

18

Q3

20

18

Q4

20

18

Q1

20

19

Q2

20

19

Q3

20

19

Q4

20

19

Q1

20

20

US$

Bill

ions

US$

Bill

ions

Americas (L) EMEA (L) APAC (L) 4-QTR Moving Total (R)

Source: CBRE Research, RCA (Americas), Q1 2020.

BUT VOLUMES SLOWED IN MARCH Monthly investment volume index (January=100)

20

40

60

80

100

120

140

January February March

Inve

stm

ent V

olu

me

Index

(Ja

nuary

=100

)

EMEA (2020)

EMEA (5-Year Ave.)

20

40

60

80

100

120

140

January February March

Americas (2020)

Americas (5-Year Ave.)

20

40

60

80

100

120

140

January February March

APAC (2020)

APAC (5-Year Ave.)

CHINA – TRANSACTIONS RESUMED IN APRILTotal building size sold in real estate transactions by city [weekly]

Source: SouFun-CREIS, Macrobond, CBRE Research, April 2020.

0.0

0.2

0.4

0.6

0.8

1.0

1.2

Mill

ion S

qm

Beijing Shanghai Shenzhen Wuhan

GLOBAL RENT AND CAPITAL VALUE LIKELY TO FALL Global GDP, rent and capital value indices (t=Q4 2019)

Source: CBRE House-View, Oxford Economics, April 2020.

75

80

85

90

95

100

105

110

115

120

t-4 t t+4 t+8 t+12 t+14

Index

April GDP Forecast

January GDP Forecast

Global All-Property Rent(COVID-19)

Global All-Property CV(COVID-19)

BUT NOT FOR AS LONG AS IN THE GREAT FINANCIAL CRISISGlobal GDP, rent and capital value indices (t=Q3 2008)

Source: CBRE House-View, Oxford Economics, April 2020.

75

80

85

90

95

100

105

110

115

t-4 t t+4 t+8 t+12

Index

GDP Great FinancialCrisis (GFC)

Pre-GFC GDPforecast (Jan 2008)

Global All-PropertyRent (GFC)

Global All-PropertyCapital Value (GFC)

BUT CAP RATES LIKELY TO INCREASE IN THE SHORT TERMCapitalization rates for major property types in the U.S.

Source: CBRE Econometric Advisors, Q1 2020.

3

4

5

6

7

8

9

10

11

12

13

(%) Office Retail Industrial Apartment Hotel

Awaiting sector-specific forecast

THOUGHTS FROM ANOTHER WORLD THAT ARE STILL

RELEVANT…

Median Incomes 2007 vs. 2017

0

20,000

40,000

60,000

80,000

Less than high schoolgraduate

High school graduate(includes equivalency)

Some college orassociate's degree

Bachelor's degree Graduate or professionaldegree

2007 - Adjusted for Inflation 2017Median Annual Earnings in U.S. by Education Level ($)

Source: U.S. Census Bureau.

MEDIAN INCOME BY EDUCATION

0

0.500

1.000

1.500

03:Q

1

06:Q

2

09:Q

3

12:Q

4

16:Q

1

Student Loan

Debt Comparison

0

2.000

4.000

6.000

8.000

10.000

03:Q

1

05:Q

4

08:Q

3

11:Q

2

14:Q

1

16:Q

4

Mortgage

0

0.200

0.400

0.600

0.800

1.000

03:Q

1

05:Q

4

08:Q

3

11:Q

2

14:Q

1

16:Q

4

Credit Card

ONE OF THESE IS NOT LIKE THE OTHERS

Source: Federal Reserve Bank of New York.

Millennials are 34%less wealthy than

previous generations at their age

Typical family headed by class of 80s was the only

cohort to lose ground 10’ – 16’

Time &

Education

Will they catch up?

BROAD IMPLICATIONS FOR SOCIETY

Source: Federal Reserve Bank of St. Louis.

GEN X VS. MILLENNIALS2001 VS. 2016

Source: National Association of Realtors

• House prices up 47%

• Wages are up 16%

Housing costs exceed income gains in 1/3 of the 100 largest metros.

INCOMES VS HOUSE PRICES

75%of millennials are renting due to

financial reasons

51%of Americans have made housing or spending choices to afford monthly

housing payment

A FEW QUICK FACTS ABOUT HOUSING AFFORDABILITY

Source: Freddie Mac.

Below Average Above Average

METRO HOMEOWNERSHIP RATES

Source: CBRE Research, U.S. Census Bureau, Q3 2019. Not seasonally adjusted. Metros 2+ million population. Arrows indicate directional change from Q3 2018.Note: margin of error for individual metros is fairly high.

SOME CONCLUDING THOUGHTS…

High and rising federal

debt would reduce national

saving and income, boost

the government’s interest

payments, limit lawmakers’

ability to respond to

unforeseen events, and

increase the likelihood of a

fiscal crisis.

Washington, we have a problem!

Federal Debt Held by the Public

Perce

ntag

e of G

ross

Dom

estic

Pro

duct

U.S. BUDGET

Source: Congressional Budget Office.

RISKS TO THE DOWNSIDE

• Politicians pressured to re-open too quickly

• Emerging markets stress

• Oil price slump

• A winter revival of COVID-19

• U.S. political tension with China

RISKS TO THE UPSIDE

• Curves are bending as predicted

• More fiscal and monetary stimulus on its way

• 70% of recent jobless claims are temporary

• Corporate America gearing up for re-start

• Oil price falls and rent falls – will be good for growth

BOTTOM LINE

• A wide V-shaped trajectory for GDP growth – Stabilization in Q3 and recovery in Q4– Strong growth in 2021

• Unemployment takes 24-36 months to fall back – A swift but partial recovery in labor demand in H2

• A swoosh-shape recovery for real estate– Industrial 12 month– Office 24 month – Retail 36 month

LONGER-TERM OUTLOOK

• The lagged effect of monetary policy and a sharp increase in government debt – Is it inflationary?

• Reshoring of production – will it push prices up?

• Don’t underestimate the impact of pent-up demand

• The capex deficit – creates the need for investment surge

• Upside from Q4 onwards with big catch-up in 2021

• Capital values broadly resilient over 24-36 months

THANK YOU!PLEASE DON’T HESITATE TO CONTACT US.

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 aresubject 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 marketcircumstances. 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 viewsherein 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 CBREor 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 thepresenter 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

DARIN MELLOTTDirector of Research,AmericasCBRE Research +1 801 869 8014darin.mellott@cbre.com