Investors are well aware of the severity of the economic crisis. Two-thirds of respondents believe the 2020 recession caused by the global health crisis could be as severe or even more severe that the 2008-2009 recession. National economic data certainly supports that view with a GDP loss in second quarter that amounted to roughly $2.1 trillion and an unprecedented 22 million jobs lost during the first two months of the pandemic.
“From an economic losses standpoint, this recession is worse than the Global Financial Crisis. However, it appears to be short lived, and it didn’t hit us the same way,” says Chang. The previous recession was characterized by a freeze in financial markets, a prolonged downturn and a slow growth cycle coming out of it. “In this case, we fell into a very deep hole very fast, but it looks like we may be coming out of it, and with a vaccine or some type of medical solution that better protects people from the virus, we could have a comparatively quick recovery,” he says. In addition, investors are benefiting from good liquidity at exceptionally low financing rates.
Uncertainty and the impact from economic fallout related to the coronavirus has weighed on transaction volume and shifted strategies. According to Real Capital Analytics, second quarter transaction activity fell 60 percent compared to the same period in 2019. A majority of respondents (62 percent) said that the spread of the coronavirus and declining interest rates have impacted their 2020 real estate investment plans in some fashion. Specifically, 29 percent plan to buy more real estate than they previously expected; 23 percent stated that they are likely to hold instead of buying more; 14 percent now intend to hold instead of selling more real estate; and 3 percent said they will sell more than previously planned [Figure 3].
When asked how the spread of the coronavirus has changed their outlook on job creation in 2020, a majority of 87 percent said their outlook is now weaker. Specifically, 29 percent said that job growth will be negative in 2020, 28 percent believe there will be short-term softening and then recover, 20 percent expect job growth to be weaker, yet still positive and 10 percent think job growth will be weaker and turn negative in 2021 [Figure 4].