While the global pandemic is still with us, economic recovery from it continued during the third quarter. However, there is still has a long way to go, and this was reflected in only modestly positive returns for property stocks.
Within real estate, while certain sectors, such as hotels, are seeing only temporary impacts from the pandemic, we have also seen an acceleration of trends that were in place prior to COVID-19. Among these trends that impact real estate are working from home as it relates to office demand, the growth in e-commerce affecting both retail and logistics demand, and growth in the internet as a driver of data centers.
Once COVID-19 passes as a public health risk, real estate will see a resumption of demand supported by massive stimulus
Swift and decisive actions by central banks around the globe have helped capital markets function properly in a way not normally seen during a recession. Property stocks remain well off their highs, but companies have shown an ability to tap the equity and debt markets for capital.
Global rates are expected to remain low, potentially for years to come based on guidance by central banks, and this should be supportive for real estate in general as demand recovers.
FTSE EPRA/NAREIT DEVELOPED RETURNS IN USD AS OF 9/30/20
While we know the global economy is reopening, the threat of COVID-19 has not yet passed. The pandemic will eventually pass, but timing for this is unclear. However, we are seeing some longer-term trends accelerate, including the threat of e-commerce to retail and the resulting benefit to logistics. Overall, once COVID-19 passes as a public health risk and economic activity resumes, the commercial real estate market will also see a resumption of demand supported by massive monetary and fiscal stimulus programs around the globe.
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