Executive Summary
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Rapidly Evolving Conditions The Fed responded on Sunday to the deteriorating economic outlook and market disruptions from the COVID-19 pandemic. Emergency moves included cutting short-term interest rates to a target range of 0% to 0.25%, restarting purchases of government and mortgage-backed securities (quantitative easing) and ensuring the availability of dollars to foreign central banks (including Canada, the U.K., the European Union and Switzerland) via enhanced swap lines. Implications for CRE Lending to commercial real estate has notably tightened in the past seven days. Prior to the crisis, lending markets had been deep and liquid. But as conditions worsened, spreads widened and some lenders and borrowers paused their activity. These measures are helpful, but it is unlikely that real estate lending conditions will ease until the extent of the virus outbreak is clearer and relatively under control. |
The Bottom Line The U.S. economy and commercial property market fundamentals were on firm footing coming into this unprecedented period. As more aggressive measures are taken to slow COVID-19’s spread, economic impacts will increase. This will result in negative GDP growth during the second quarter. CBRE has lowered its estimate of full-year growth to 1.3%, with risks biased to the downside. Property values and activity will take a short-term hit, but there is no reason to think that the effects on values will last long. |