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CBRE: US markets entered crisis with extremely strong fundamentals

However, property markets will reflect the broader economy, which is expected to see a short-term slowdown. Should the spread of the virus prove to be only seasonal, impacts will lessen as the weather warms, allowing for stronger growth in the second half of the year.

Capital markets transactions likely will slow for the time being, and values will come under pressure. However, additionally, there may be some impact on leasing, as decisions on new space are deferred. With the 10-year Treasury trading at historically low levels—below 1% for the first time—low interest rates will be a positive factor for property markets.

CBRE’s Richard Barkham and Spencer Levy on the outlook for US sectors:

Hotels: There has been a reduction in business and leisure travel, both globally and domestically. Using the SARS pandemic of 2003 as an example, the hotel industry could be severely impacted for up to six months.

Retail: Near-term impacts will occur due to reductions in travel, particularly for food & beverage establishments, entertainment venues and fashion retailers. Omnichannel retailers could see some near-term upside as consumers avoid stores and shopping malls, but consumer sentiment may weigh on the sector over a longer period.

Industrial: Manufacturing and distribution facilities may be impacted by lack of inventory as supply chains are disrupted. Broader economic impacts could further weigh on the industrial sector as reductions in both supply and demand ripple across the economy. Conversely, if the virus prompts more people to shop for goods and food online, this would bolster demand for last-mile distribution space.

Office and Multifamily: Impacts on fundamentals in these sectors likely will be secondary and more closely associated with overall economic activity.

Construction: Building material supply chains are being affected with significant backlogs at Chinese ports. Imports from other parts of Asia are also being impacted. Multifamily construction likely will feel the most acute effects due the importance of Asian-sourced materials for residential construction.

Barkham and Levy added:

“Property market fundamentals are well-positioned heading into a period of economic uncertainty but still will be affected. Downside risks have increased as COVID-19 spreads worldwide. Market volatility is a threat to the consumer confidence that has underpinned economic growth over the past year. A deterioration in consumer sentiment may further affect the outlook.

“It is unlikely that confidence will return until the spread of COVID-19 is contained, which is why the Fed acted urgently today. Furthermore, fiscal and monetary policymakers retain significant capacity to act forcefully in response to additional downside risks posed by this evolving threat to economic activity. In the long term, pent-up demand and the lagged effects of monetary policy should provide significant tailwinds to the global economy.”