Keep up to date with the news about valuation trends..... 

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6% Economic Contraction then Recovery starting in the 3rd Quarter

16 chief economists from some of the largest U.S. Banks say that the U.S. economy will experience about a 6% contraction this year, but will begin to recover from a severe second-quarter downturn in the third quarter, according to the latest forecast of the American Bankers Association’s Economic Advisory Committee. May 29, 2020
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Fed signals interest rates near 0% through 2022

Despite last week’s blockbuster jobs report, the Federal Reserve is showing no letup as it continues to respond aggressively to economic damage from the coronavirus pandemic that could linger for years. The Fed on Wednesday held its key interest rate near zero and signaled it likely won’t lift it until at least 2022, noting the outbreak “will weigh heavily on economic activity” and “poses considerable risks to the economic outlook.” “We’re not even thinking about raising rates,” Fed Chair Jerome Powell said in a virtual news conference. “We’re not even thinking about thinking about raising rates." June 10, 2020
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Buyer/Owner Price Disconnet Widening

Do not be fooled into thinking that U.S. commercial property prices have already fallen at high double-digit rates. Until market participants can comfortably start visiting properties, clients, and other service providers – and we enter the price discovery phase of the downturn – prices cannot move. However, the spread between buyer and owner expectations on pricing has widened sharply. June 11, 2020
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Commercial Rental Defaults Up in April

As businesses begin to re-open across the U.S., commercial property owners are coping with rent-collection woes triggered by the COVID-19 pandemic and protest-related property damage, which was reported in at least 25 cities. The retail and hospitality sectors have been especially hard-hit. Owners of 30,000 strip malls in the U.S. received just 30 to 50 percent of April rent, according to Green Street Advisors. June 10, 2020
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Global Trend is bouncing back? Maybe

Despite the slowdown in real estate markets accelerating across most of the world into the second quarter of the year, acquisition trends in two key global cities, both in China, have turned positive. Global volumes started to wane around March this year, but the weakness in Asia Pacific had already been apparent for some time, as all of the region’s top 10 metros suffered double-digit declines in the first quarter. In contrast, more than half of the key metros in Europe and the U.S. recorded an increase in transaction activity, as economic shutdowns and travel restrictions were implemented later in the quarter. June 10, 2020
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Home Prices/Rents directly linked to jobs

The U.S. economy added 2.5 million jobs in May and the unemployment rate declined to 13.3% from the prior report’s 14.7%, according to the Bureau of Labor Statistics. With jobs on the upswing, Mike Swell, co-head of global fixed income portfolio management at Goldman Sachs Asset Management, says a housing crisis is unlikely. According to Swell, the residential housing market will be 100% correlated to the jobs market and adds that he expects the commercial real estate market to stabilize. In this Video Spotlight, Swell speaks with Bloomberg's Tom Keene, Lisa Abramowicz and Jonathan Ferro on the job market's relationship with the housing market. June 8, 2020
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CBRE Expert Roundtable Flash Call

The COVID-19 situation around the world is fluid and evolving. As difficult as this period is, uncertainty will bring about unprecedented change and an opportunity to influence the future—and likely some transformational innovation, too. Preparing to reopen workplaces will require careful consideration and tailored plans. As we begin to execute a thoughtful and phased reopening approach, human behavior, along with digital and building technologies, will play a vital role in mitigating risk. To explore this topic further, CBRE hosted a roundtable discussing key issues related to a safe and healthy return to work. Subject matter experts shared insights on the global economy, prudent reopening practices, the role of smart buildings and technology, COVID-19 track-and-trace strategies, and more. May 19, 2020
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Shrinking Buyer Pool May Accelerate Price Floor Discovery

The drivers of the current downturn in the economy and commercial property markets are distinct from those which led to the Global Financial Crisis (GFC). This Covid-19 downturn came on suddenly, while warning bells were ringing a number of years ahead of the collapse of the housing market in the last recession. The variation in drivers could lead to a faster race to the bottom for market prices this cycle. May 27, 2020
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Is the housing price-rent ratio a leading indicator?

Economic forecasters are always on the lookout for variables that can help predict upcoming recessions. One such variable that has gotten some recent attention is the housing price-rent ratio. As this ratio becomes higher, the rental option becomes more attractive. If it rises high enough, some households might switch from owning their homes to renting them; then the demand for owner-occupied housing would fall. The result is a contraction in the housing market that can have adverse effects on the entire economy. This narrative seems to match well with the behavior of the housing price-rent ratio leading up to the Great Recession. So if the housing price-rent ratio is on the rise again, does that mean it’s cause for concern? Let’s try to evaluate whether the housing price-rent ratio is a reliable leading indicator by graphing it, with data going back to 1975.
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Commercial Sales Activity off 71%

The headline rate of annual U.S. commercial property price gains came in at 6.5% in April, little changed from the growth rate seen in 2020 so far, the latest RCA CPPI summary report shows. The US National All-Property Index gained 0.5% from March. While transaction prices have not yet been pounded by the Covid-19 upheaval, acquisition volume has. April sales activity across all property types sank 71% from a year earlier, on the heels of a 17% year-over-year decline in March, as reported in the latest edition of US Capital Trends, also released this week. May 21, 2020
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Multifamily Sector Sees Reduced Construction: Report

Around 300,000 multifamily units were expected to open this year, but projections now show the number is closer to 250,000 due to the effects of the coronavirus pandemic, according to commercial real estate firm Marcus & Millichap, Multi-Housing News reported May 12, 2020. The multifamily outlook for the next couple years is mixed and largely dependent on lender confidence.
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US Hotel Market Frozen

In the month of April fewer than 10 hotel properties changed hands across the entire U.S. We have never seen this level of illiquidity in the hotel market. It is effectively a frozen marketplace. Hotel sector investment activity was already spinning downward even before the economic crisis wrought by Covid-19. A construction glut in key markets and challenges from upstarts such as Airbnb had put the sector under pressure. May 20 2020
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Small Business Pulse Survey: Tracking Changes During the COVID-19 Pandemic

The experimental Small Business Pulse Survey (Business Pulse) measures the changes in business conditions on our nation’s small businesses during the coronavirus (COVID-19) pandemic. May 14, 2020.
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The Good and Bad of Retail Sales

Abundance of demand for high-quality assets with investment grade credit tenants that are open and paying rent. - Financing is readily available. - Capitalization rates for high-quality assets are unchanged from pre-COVID-19 20%-50% of retail tenants paid rent in April. - 30% of small business paid no rent or mortgage payments while 20% made a partial payment. - On average, market rents have probably declined to levels seen 1 to 2 years ago. - 10% to 40% or restaurants are projected to not reopen. See this 120 minutes presentation from experts examining the impact of the coronavirus on commercial property. April 20, 2020.
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NAIOP CRE Sentiment Index at New Low; Occupancy, Cap Rates Among Low Scores

The Commercial Real Estate Development Association's CRE Sentiment Index fell to 45 in March — its lowest score since NAIOP launched its bi-annual index in 2016; a score below 50 indicates that unfavorable CRE conditions are expected for 12 months. The scores for occupancy rates and first-year cap rates were among the lowest. May 14, 2020
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Office Sector Expected to Recover; Newer 'Green' Buildings to Grow in Demand:

CBRE The office sector is expected to recover from the coronavirus pandemic, but it likely will be changed as companies may seek more space, not less, to accommodate social distancing, and choose newer buildings with green elements like improved indoor air quality over older buildings with outdated features, according to real estate firm CBRE, CNBC reported. May 14, 2020
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Recession vs. Depression

How would each affect housing and does it matter anyway? May 18, 2020.
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Annual Price Change of Global Metros Q1 2020

Commercial property prices pushed higher in the majority of leading global metros in the first quarter of 2020, the latest RCA CPPI Global Cities report shows, with the Covid-19 crisis not yet hitting sale prices. The headline rate of global price growth eased to 2.3% from a year ago and dipped 0.2% from the prior quarter, but most of the weakness came from declines already underway in Asia Pacific. Annual price growth for North American metros came in at 5.4% and for European metros the annual pace was 5.9%. The price index for Asia Pacific metros dropped 4.7% from a year ago, dragged down by Hong Kong’s slide.
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