GLOBAL RESIDENTIAL & COMMECIAL REALTY TRENDS

COVID-19 HAS PRESENTED THE GLOBAL PROPERTY MARKET WITH AN UNPRECEDENTED CHALLENGE, AND MANY MAJOR ECONOMIES FIND THEMSELVES IN UNCHARTERED TERRITORY. With economic downturns in all major markets, global recession has been identified as the biggest risk for the world’s real estate market. However, investors may take comfort in the fact that most countries are showing positive economic recovery and are more optimistic about the residential as well as commercial real estate at the year-end than they were at the start of the pandemic. GLOBAL REAL ESTATE POLICY RESPONSE TO COVID-19 As per JLL, countries around the world have implemented changes to real estate policy in order to lessen the burden on tenants and in some cases landlords. In the U.S., many decisions are made at the state and local level, and at least 34 states have temporarily prohibited evictions. At the same time, the federal government issued a 120-day moratorium on evictions from federally subsidized housing or from a property with a federally backed mortgage loan. Major mortgage lenders, including Citigroup and JPMorgan Chase, suspended mortgage payments. Some U.S. states have halted construction on all projects unless essential, such as medical facilities. In Europe, several countries, including the U.K., Germany and France, have suspended evictions. A number, like the U.K. and Italy, are providing temporary mortgage relief. In various locations across Europe, commercial and residential tenants have been offered mortgage and rent holidays. Some countries, such as France and Italy, have suspended construction. Banks in Europe are being strongly encouraged to give forbearance and not to foreclose on late payments, while governments have granted retailers tax relief. In parts of Asia, some landlords have offered temporary rental rebates and rent discounts. Meanwhile, some countries, like Singapore, are considering legislation that would protect commercial tenants who cannot pay rent for a period of six months. Situation in Asia Pacific has provided a benchmark for what a recovery could look like in other regions. Manufacturing is returning to normal and transactional activity is gradually improving across the region, and investor appetite is growing. Despite interest rates already hovering at generally low levels, major central banks have reduced policy rates further, in some cases to levels unseen since the Global Financial Crisis or new record-low levels. GLOBAL RESIDENTIAL REALTY LIKELY TO SEE PRICE RISE The prime residential prices across the 22 cities (on average) are expected to remain static in 2020, before rising by 2% in 2021, according to a report by Knight Frank. Some markets have had a helping hand from policymakers – London and Mumbai are enjoying stamp duty holidays, while others such as Vancouver and Miami are seeing a flurry of sales activity as residents reconsider their property requirements in light of the pandemic. A lack of prime supply is cushioning prices in some markets (Singapore, Sydney and Los Angeles) while others are benefitting from their safe haven credentials (Geneva, Auckland). Some cities were left reeling from the economic fallout of lengthy and stringent lockdowns (Cape Town, Madrid) not to mention the scale of the pandemic (Buenos Aires). Underpinning the resilience of housing markets are the vast stimulus packages that governments and central banks have employed to support incomes and companies, whilst keeping borrowing costs near record lows. GLOBAL COMMERCIAL REALTY BREAKING INERTIA THE impact of COVID-19 on the global economy and the CRE industry has made 2020 the most memorable year in recent history as per Deloitte Outlook. With economic recovery heavily dependent on a vaccine, the length of this downturn remains uncertain. Global CRE deal volume declined 36% year over year (YoY) to US$306B in 2Q20 due to economic stagnation and an uncertain pricing environment. Along with the evolving financial landscape, the pandemic has resulted in tectonic shifts in the way people live, work, and play, which has put unique pressures on certain property sectors. CRE leaders have their work cut out. The critical decisions and investments leaders make now could come to fruition over the next 12 months. They should strive to be digital—optimizing business, operating, and customer models for a digital environment. Rapid digital transformation will likely be needed to build operational resilience, maintain a strong financial position, develop and retain talent, and create an enabling culture. Unlike the Global Financial Crisis (GFC), CRE companies had generally strong financials at the start of the pandemic and debt markets remain sufficiently liquid. Yet, troubled loans are rising; banks, fearing higher delinquencies, are tightening lending standards.  In several sectors, rent collections have remained healthy, but largely because of higher tenant incentives and leasing concessions.