The Coronavirus, the End of the Cycle, and U.S. Commercial Property Markets: Early Thoughts

The coronavirus has seized the global economy. With the number of confirmed cases globally and in the U.S. growing by about one-third per day – that is, doubling every three days – a broad range of economic activity is rapidly shutting down, either by fiat or collapsing consumer demand, dramatically compounding the supply chain disruption that began last month. A near-term recession now seems to be a virtual certainty – both globally and in the U.S. – if we’re not in one already. This is all coming as the economy was slowing anyway, particularly in Europe.

The questions that remain are the unknowns at the onset of any recession: how deep, how long, and how widespread? The most recent signs are worrying indeed with cascading events that suggest that the downturn may well precipitate a full-blown financial crisis.

But with the unprecedented pace of events and scale of governmental responses to this pandemic, projecting economic conditions would be folly: forecasting models are simply not designed to capture this scenario. Much will depend on how widely and quickly COVID-19 spreads; the success of governmental efforts to contain and address the contagion; and the ability of central banks and governments to counteract the economic devastation and bolster confidence.

Rather than offering precise forecasts that are rendered obsolete almost as soon as they are written, the goal of this article is to provide some perspective on how the economic shutdown (shutdown!) may affect different segments of the commercial real estate sector, both near-term and longer-term. Suffice it to say, with so much that is uncertain and even unknowable at this point, the best course of action for most market participants is to defer major decisions until there is greater clarity as to market directions.

You may read the full article in the Real Estate Issues journal published by the Counselors of Real Estate here.