Spencer Levy, Chairman of Americas Research for CBRE, says “it
is always darkest before the dawn” and explains that the recent market
deterioration as a result from COVID-19 has caused an “unprecedented and
unified global response from the United States Government and the governments
of foreign countries to provide a fiscal stimulus to the economy.” Levy adds that
financial stimulus packages have already been unveiled and suggests more will
be rolled out shortly.
He also explains the phenomenon of “headline risk,” in which
many investors make knee-jerk decisions based on media accounts of adverse
global events such as the coronavirus outbreak. Levy’s advice? “Observe the
panic, stay calm and don’t overreact. Headline risk can be an advantage for those
who pay little heed to all the noise.”
Levy explained that the real estate industry faces new
challenges from COVID-19. Due to travel restrictions, some investors—particularly
from certain foreign countries—are reluctant to bid on assets because they can’t
physically review them. Based on how investors reacted to the SARS virus in
2003, Levy believes we have a difficult three to six months ahead of us before
the economy bounces back and normalcy returns.
“Travel and leisure-related activities will be the most
seriously impacted, and companies will delay real estate decisions until the
end of the year. We expect a robust end to 2020 to make up for the losses we
are now experiencing. Another headline risk is the upcoming presidential
election, which may cause overreaction by investors.”
Levy quotes Warren Buffett, who said “be greedy when people
are fearful and fearful when people are greedy.” As it relates to commercial
real estate, he suggests “running into the fire and buying when the market
reacts to irrational fears.”