Spencer Levy, CBRE

June 25, 2020 – Reinforcing comments he delivered during a NAIOP Maryland webinar this spring, Spencer Levy, Chairman of Americas Research and Senior Economic Advisor for CBRE, remains unabashedly optimistic about the short- and long-term future of the industrial and commercial office sector. Levy’s one caveat is that “every section of the country will perform and recover differently” with prospects “looking better for suburban rather than high-density areas.”

Levy’s keynote remarks during this week’s NAIOP I.CON conference included projections about the economic recovery, retail trends, the industrial sector and the return of Americans to their workplaces:

  • “I am often called overly-optimistic, but we study comps from 9/11 and the economic crisis of 2008 and we believe the real estate markets have already recovered more quickly than predicted. As we can see from China, where they implemented a testing, tracking and technology solution to the pandemic, it worked and the United States will do the same. CBRE envisions a V-shaped recovery with a bounce back in the third and fourth quarters, followed by a strong 2021.”  
  • “There will be material difference in the overall timing of the recovery based on geographic location, with suburban markets outperforming high-density sections of the country. The next 12-18 months will remain challenging in major downtown areas due to the resistance to use mass transit while commuting and elevator access. Among many companies, we are seeing a hub-and-spoke model, with the opening of satellite offices in the suburbs to support a main office in the city. Overall, the next 60 days will be the most important period in the history of real estate as it relates to collecting rent.”
  • “Our outlook is predicated on the federal government creating another liquidity mechanism, particularly to help retail and hotels. Despite the problems, the…Paycheck [Protection] Program worked and raised the bottom and we expect another program to surface. We have also factored a return spike of coronavirus cases into our predictions.”
  • “The stock market is the most important barometer regarding consumer confidence. If the market is performing well, people are more interested in spending money and supporting the economy. Once experience retail opens en masse — such as gyms and restaurants — people will immediately flock back. I call it revenge retail.”
  • “Every trend favors industrial, and they are the net winners from the pandemic. Secular shifts have benefited this market with the growing popularity of online shopping and the demand for industrial space continues. Our long-term forecast for industrial is brighter now than it was in January of this year.”
  • “Employees will return to the office because they want to, not because they have to. They are attracted by the feeling of collaboration, the need to develop and retain soft skills and to feel part of a team. More safety and wellness protocols will be incorporated into the office with janitorial services in front of the house in addition to behind it. Advanced HVAC systems will improve air quality.”
  • “The pandemic accelerated retail trends that were already occurring, including the demise of second-tier-market malls and department stores. Malls are not dead. They just need to change and they will.”