CORONAVIRUS SPECIAL UPDATE KEEP CALM, STAY HOME & CARRY ON 19 - - PowerPoint PPT Presentation
CORONAVIRUS SPECIAL UPDATE KEEP CALM, STAY HOME & CARRY ON 19 MARCH 2020 RESEARCH & STRATEGY Hans Vrensen CFA, CRE Dennis Schoenmaker Ph.D. ASSOCIATE DIRECTOR MANAGING DIRECTOR Tel +44 (0)20 7016 4860 Tel +44 (0)20 7016 4753
FOCUSED ON THE FUTURE OF REAL ESTATE
CORONAVIRUS SPECIAL UPDATE
KEEP CALM, STAY HOME & CARRY ON
19 MARCH 2020
RESEARCH & STRATEGY
Hans Vrensen CFA, CRE
MANAGING DIRECTOR Tel +44 (0)20 7016 4753 hans.vrensen@eu.aew.com
Dennis Schoenmaker Ph.D.
ASSOCIATE DIRECTOR Tel +44 (0)20 7016 4860 dennis.schoenmaker@eu.aew.com
Focused on the Future of Real Estate
WEAKENING GLOBAL GROWTH MIGHT TRIGGER 2020 RECESSION IN EUROPE
ECONOMIC FUNDAMENTALS COULD SIGNAL V-SHAPED RECOVERY
Sources: Oxford Economics, Moody’s, OECD & AEW
5
0.5 1 1.5 2 2.5 3 2020 Jan 2020 Mar Pandemic Scenario Global GDP growth (%)
Oxford Economics Moody's OECD *Not based on Pandemic
Focused on the Future of Real Estate
STOCK MARKET CORRECTION COMBINED WITH OIL PRICE DECLINE
IMPACT OF MASSIVE MONETARY & FISCAL POLICIES NOT YET IN STOCKS
Real Estate Equity PREE Real Estate Equity LREE Corp Equity LCE Real Estate Debt PRED Real Estate Bonds LREB Corp Bonds LCB
Sources: Bloomberg & AEW
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20 30 40 50 60 70 80 90 100 110 60 80 100 120 140 160 180 Oil Price (€) European Stock Market (Index 2006=100)
European Stock Market Index (LHS) Oil Price (RHS)
2006 2008 2010 2012 2014 2016 2018 Q1 2020
Focused on the Future of Real Estate
RISK-OFF MENTALITY TRIGGERS GOVERNMENT BOND YIELDS DIVERGENCE
PREVIOUS SAFE HAVENS HAVE WIDENED OUT IN SHORT TERM
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Sources: Bloomberg & AEW
0.0 0.2 0.4 0.6 0.8 1.0 1.2 1.4 1.6 1.8 2.0
0.2 0.7 1.2 1.7 2.2
09/2019 10/2019 11/2019 12/2019 01/2020 02/2020 03/2020
Government Bond Yield (%) Government Bond Yield (%)
Diff (RHS) DE & FR ES & IT
Q3 2019 Q4 2019 Q1 2020
Focused on the Future of Real Estate
CORPORATE CREDIT YIELD SPIKES LINKED TO DECLINES IN MARKET RENTS
LEASES, NEED FOR SPACE & STABILITY IN TENANT CREDIT OFFER SHORT TERM PROTECTION
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Sources: Bloomberg, CBRE & AEW
0% 5% 10% 15% 20% 25%
5 10 15 20 25 CRE Rental Growth (y-o-y, %) High Yield Corporate Bond (%)
ICE BofA Euro High Yield Index Effective Yield CBRE EU 15 rent growth index
Focused on the Future of Real Estate
STOCK MARKET MOVES ASSOCIATED WITH DELAYED CHANGES IN VOLUMES
NO CAUSALITY , BUT CURRENT PRACTICAL ISSUES LIKELY TO TRIGGER PAUSE
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Sources: RCA, Bloomberg & AEW Q1 2019 Q3 2009 Q4 2009 Q3 2010 Q2 2016 Q2 2019 R² = 0.2462
0% 10% 20% 30% 40% 50%
0% 20% 40% 60% 80%
Stock Market Performance (y-o-y, %)
Commercial Real Estate Volumes (y-o-y, %)
Focused on the Future of Real Estate
STOCK MARKET CORRELATES WITH PRIME VALUES OVER THE LONG-RUN
BROADENING RANGE OF POLICIES COULD TRIGGER STOCK MARKET REBOUND
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Sources: CBRE, Bloomberg & AEW
0% 25% 50% 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 17th March Annual Percentage Change (q-o-q, %)
CRE Price Stock-Market Performance
Focused on the Future of Real Estate
BOSTON LONDON PARIS DÜSSELDORF HONG KONG AEW.COM
RESEARCH & STRATEGY
Hans Vrensen CFA, CRE
MANAGING DIRECTOR Tel +44 (0)20 7016 4753 hans.vrensen@eu.aew.com
Dennis Schoenmaker Ph.D.
ASSOCIATE DIRECTOR Tel +44 (0)20 7016 4860 dennis.schoenmaker@eu.aew.com