The ULI Center for Capital Markets and Real Estate’s latest semiannual consensus forecast of real estate and economic indicators anticipates a 5 percent decline in real gross domestic product (GDP) for this year, with increases of 3.6 percent and 3.2 percent in 2021 and 2022, respectively. The semiannual survey based on the median of the forecasts from 43 economists and analysts at 37 leading real estate organizations completed in late September through early October, also anticipates this year’s unemployment rate to be 8 percent, declining to 6.6 percent in 2021 and 5.5 percent the following year.

A panel of experts moderated by Jeanette Rice, Americas head of multifamily research and real estate economist at CBRE, offered their own takes on those and other indicators during a panel discussion at the 2020 ULI Virtual Fall Meeting. In some instances, panelists said those numbers may be too optimistic and likely were predicated on a belief that a second round of economic stimulus from the government would be on the way. “Without a second level of stimulus, fourth-quarter GDP could be very poor,” said Doug Poutasse, managing director and head of strategy and research at BentallGreenOak.

Mary Ludgin, senior managing director and director of global investment research at Heitman, said she is concerned about recently announced layoffs at Fortune 500 companies. “It’s just the beginning,” she warned, adding that state and local governments “are in a world of hurt.” Some of their problems may be self-inflicted, she noted, but political polarization is not helping them.

Suzanne Mulvee, senior vice president of research and strategy at GID, said that some of the drivers behind improving employment rates are, in fact, negative. “A lot of folks have left the labor force,” she said, pointing to women who have left jobs to care for children who are not in school. “That’s a real burden on the economy.”

The employment plans of baby boomers concern her as well. “Twenty-seven percent of the workforce is age 55 to 64. That’s a huge chunk of the employment base that is moving toward retirement,” Mulvee said. Their move to retirement may be accelerated by the current situation, and they will be replaced by younger employees who earn less. “That’s a natural deflationary pull on the economy,” she noted.

Poutasse said the recent “incredible” returns in the stock market may convince more of those employees that they can retire early.

Prospects for hotel and retail properties, in particular, are cause for concern, according to panelists. But opportunities may be found in repurposing those properties for better uses.

Business travel is not going to get back to where it was before the pandemic, said Poutasse. There may be pent-up demand for leisure travel, but convention and other business-oriented hotels will recover more slowly, and not within the forecast period.

Ludgin predicted that “there are going to be opportunities galore in the hotel sector” as inventory diminishes due to closings and repurposing to other uses.

They voiced similar prospects for the retail sector.

Regarding retail, Mulvee said, “Unfortunately, you can say we finally killed hope.” There was a huge oversupply of space, perhaps 1 billion square feet [93 million sq m], that needed to be removed from the market, even before the pandemic accelerated the shift to e-commerce. “The process of taking out uneconomic supply was very slow because the owner has hope they could always find another tenant, someone to take that space to keep that revenue stream alive and preserve their value,” she explained. “A lot of owners are not going to see that hope anymore; they’re going to think of what else that space could be. I think that’s very healthy. It’s cathartic to the sector.”

However, Mulvee sees hope for experience-focused retail properties. “If the quarantine has taught us anything, it’s that it’s nice to leave your house.” In particular, she is optimistic about prospects for niche retail. Ludgin noted that once there is a vaccine or treatment for COVID-19, “you’re going to see experiential retail boom.”

Panelists expect a bounce back for multifamily housing. Affordability is increasing and will be a catalyst to pull in demand and help markets, said Mulvee. But Poutasse is concerned about the economics facing renters, including those pushed into rental markets by the loss of their homes to foreclosure. “We’re going to have rent issues. There are a lot of people barely skating by,” he said.

Panelists had mixed opinions about the outlook for office space and work-from-home trends.

Office demand will recover next year, but that falls short of growth, noted Poutasse. He was concerned that government restrictions on the entry of foreign students and professionals will dampen demand for years, even if those policies are reversed. “Patterns have been broken,” he said.

Panelists do not expect that a desire by some workers to continue working from home will destroy demand for downtown office space, though we could see more people splitting the week between days worked at home and days in the office. “A young person with even a modicum of ambition is going to want to be in the office,” Mulvee said.

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