Commercial real estate outlook

Q3 2020: Divergent roads

After a decade of strong performance in which property prices more than doubled, the commercial real estate market, like many other markets across the globe, was halted in its tracks by the pandemic.

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July 7, 2020 | 22 minute read

Executive summary

After a decade of strong performance in which property prices more than doubled, the commercial real estate (CRE) market, like many other markets across the globe, was halted in its tracks by the COVID-19 pandemic. Activity has dried up and uncertainty has permeated the outlook. Ultimately, the market will be dictated by the path of the pandemic and the economic recovery, though different property types face starkly disparate backdrops.

Key takeaways:

  • The U.S. economy likely saw its economic trough in late April or early May, though significant uncertainties surround the recovery.
  • The COVID-19 pandemic has caused activity in CRE capital markets to dry up as investors seek to understand the short- and long-term impacts of the downturn.
  • Performance dispersion between property types has increased in recent years, and the pandemic may act as an accelerant for existing trends.

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Any projections, forecasts and estimates contained herein are based upon certain assumptions that the author considers reasonable. Projections are necessarily speculative in nature, and it can be expected that some or all of the assumptions underlying the projections will not materialize or will vary significantly from actual results. The inclusion of projections herein should not be regarded as a representation or guarantee regarding the reliability, accuracy or completeness of the information contained herein, and neither FS Investments nor the author are under any obligation to update or keep current such information.

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Matthew Malone, CFA

Managing Director, Real Estate

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