This presentation was given in the early days of Covid during 2020. It provided some insight on valuing commercial real estate during the pandemic.

1. Market Impact
and Covid-19

2. Tim Wilmath, MAI
2
Chief Appraiser
Palm Beach County
Property Appraiser’s Office

3. 3
Covid-19 - Other Market Downturns

4. 4
Covid-19 - Affected Properties
Moody’s Analytics
divided industries into
“High Exposure”,
“Moderate Exposure”
and “Low Exposure”.

5. 5
Covid-19 - Recovery Time
Morgan Stanley predicts some workers will start going back to work in June, 2020,
with another wave returning in mid-summer 2020.
Source: Morgan Stanley Research – “After the Coronavirus Peak what’s next?” April, 15, 2020

6. 6
Covid-19 - Recovery Time
Cushman & Wakefield
looked at 3 recovery
scenarios:
1) V-Shaped - 2021-Q1
(1-year recovery)
2) U-Shaped – 2022-Q2
(2-year recovery)
3) “Swoosh” - 2023-Q1
(3-year recovery)
Source: Cushman & Wakefield – Coronavirus Impact on the Property Markets – April 2020

7. 7
Covid-19 - Recovery Time
Moody’s predicts a significant drop in
worldwide economic growth, but then
rebounding in 2021.

8. 8
Covid-19 - Recovery Time
Green Street Advisors conducted analysis that
shows the impact to property value when
GDP drops 1%.

9. 9
Covid-19 - Recovery Time
The DOW Jones Industrial
Average and REIT stock
prices are somewhat
correlated with sales of
commercial real estate.
They can provide an
indication of where we
may be going with real
estate prices. Source: Cushman & Wakefield – Coronavirus Impact on the Property Markets – April 2020

10. 10
Covid-19 - 1918 Flu Epidemic
The 1918 Flu Epidemic
(aka Spanish Flu) started
in early-1918 and lasted
until late-1919, a period
of almost 2 years.
The DOW Jones
Industrial Average was
already dropping when
the Spanish Flu hit and
continued to drop for
about a year longer.
Source: www.CDC.gov
Source: https://www.macrotrends.net
Dow Jones Industrial Average

11. 11
Covid-19 - SARS in China 2003
Hong Kong real estate prices were already falling
in February 2003 when the SARS virus struck.
They continued to fall for the next two years.
Hotel occupancy recovered within 6 months.

12. 12
Covid-19 - 9/11
Dow Jones Industrial Average
U.S. Real GDP Change
The DOW had a
record-setting drop
after 9/11, but
recovered within a
few months.
GDP was declining
at the time of the
attacks, and
continued
downward until
January 2002.

13. 13
Covid-19 - Great Recession 2008
U.S. Real GDP Change
Dow Jones Industrial Case-Shiller U.S. National Home Price Index
The great recession
technically lasted from
2007-2009, but as the
Case-Shiller Index above
shows, real estate prices
dropped for 4 ½ years.
U.S. Real GDP Change

14. 14
Covid-19 - Impact on Property Types

15. 15
Covid-19 - Impact on Property Types
Green Street published
REIT performance from
February 2020 to March
2020.
Although the numbers
change daily, the varying
impact to different
property types is revealing.

16. 16
Covid-19 - Hotels
CBRE anticipates hotel demand will drop for 6-10
months but ADR/REV PAR will take 12-16 months
to recover.

17. 17
Covid-19 - Hotels
In their “base recession”
projection (middle column) –
Lodging Analytics Research and
Consulting predicts that Hotel
Values will change:
-28.5% in 2020
+6.8% in 2021
Full recovery by 2024

18. 18
Covid-19 - Hotels
HVS anticipates most likely (middle column) a 27% drop in hotel
values for 2020, with an increase of 15% in the following year.
Full recovery most likely in 2023.

19. 19
Covid-19 - Hotels
Oxford Economics compares job loss and occupancy during 9/11,
and the Great Recession to the Corona Virus. They predict Covid-
19 impact to hotels will be twice as bad as those previous events.

20. 20
Covid-19 - Hotels
The total number of U.S. hotel rooms under construction as of
February 2020 is the highest on record, matching the last peak set
in Dec 2007.

21. 21
Covid-19 - Restaurants
On March 8, 2020 reservations on OpenTable.com were pretty
normal. Three weeks later reservations had fallen to zero.

22. 22
Covid-19 - Restaurants
Source: National Restaurant Association

23. 23
Covid-19 - Restaurants
Sysco‘s stock price dropped from $70.00
on March 1, 2020 to $55.84 on April 29th,
a 20% drop in 60 days.
Darden Restaurants’ stock price dropped
from $98.00 on March 1, 2020 to $74.80
on April 29th, a 23% drop in 60 days.

24. 24
Covid-19 - Retail

25. 25
Covid-19 - Retail
Realty Income’s stock price dropped from
$75.00 on March 1, 2020 to $53.19 on
April 29thth, a 30% drop in 60 days.
National Retail Properties stock price
dropped from $52.00 on March 1, 2020,
to $31.91 on April 29th, a 38% drop in 60
days.

26. 26
Covid-19 - Senior Housing
NIC reports that Health Care facilities are seeing a loss in
occupancy, particularly in the Nursing Home sector
Source: National Investment Center for Seniors Housing & Care (NIC)

27. 27
Covid-19 - Residential Market
National Association of Realtors – Economic Pulse Survey April 6, 2020
37% of Realtors don’t expect residential
prices to fall. Of those that do, most
expect a small drop (less than 10%).
72% of Realtors don’t think sellers will
lower prices. Of those that do, most
think it won’t be much (less than 5%).

28. 28
Covid-19 - Multifamily
The multifamily market will be affected in the
short term by unemployment. However, demand
for apartments was very strong pre-crisis.

29. 29
Covid-19 - Multifamily
Aimco’s stock price dropped from $50.00
on March 1, 2020, to $37.21 on April
29th, a 25% drop in 60 days.
Camden Property Trust’s stock price
dropped from $110.00 on March 1, 2020,
to $86.42 on April 29th, a 21% drop in 60
days.

30. 30
Covid-19 - Industrial

31. 31
Covid-19 - Office
“There's not going
“There's not going
to be any loss of
office demand,
because people will
do anything they
can to get back in
the office”
Angelo Bianco
Managing Partner
Crocker Partners

32. 32
Covid-19 -Unemployment
The U.S. unemployment rate is currently
at about 20%, with over 36.4 million
people filing for unemployment in the
past 2 months.

33. 33
Covid-19 Market Impact -Conclusion

34. 34
Covid-19 Real Estate Resources
https://www.cbre.com/covid-19
https://www.cushmanwakefield.com/en/insights/covid-19
https://www.us.jll.com/en/coronavirus-resources
https://www.marcusmillichap.com/research/coronavirus-update
https://www.icsc.com/
http://www.ngkf.com/covid-19/
https://avison-young.foleon.com/covid-19-updates/resource-centre/research-update/
https://insights.greenstreetadvisors.com/coronavirus-featured-content
https://www.realtor.com/covid-19/
https://www.zillow.com/research/
https://www.ahla.com/covid-19-resource-center
https://www.oxfordeconomics.com/coronavirus
https://www.globest.com/

35. Tim Wilmath, MAI – twilmath@pbcgov.org
Palm Beach County Property Appraiser’s Office