Real Estate

Winter is Here, But Spring is Coming

February, 2021 – 11 min read
With additional fiscal relief and steady progress in vaccinations in the first half of 2021, the U.S. economy should be regaining momentum by the end of Q2, helping to stabilize real estate demand in the second half of the year. The Barings Real Estate team weighs in.

Economy

  • The recovery in the U.S. economy and labor market has been put on hold as authorities reintroduced restrictions on social and business activity to contain the latest COVID wave.
  • Massive fiscal relief and monetary stimulus continue to support the U.S. and global economies and financial markets for now, but both will likely need continued support.
  • Although the U.S. economy shed jobs in December, job losses were largely confined to services business, which have been most impacted by COVID restrictions.
  • With additional fiscal relief and steady progress in vaccinations in the first half of 2021, the economy should be regaining momentum by the end of Q2, helping to stabilize real estate demand in the second half of the year.
     

Property Markets

  • With the notable exception of the industrial sector, occupier market fundamentals continue to deteriorate across the major property types.
  • New supply and leasing concessions continue to weigh on apartment effective rents and occupancies.
  • Warehouse demand surged in Q4 2020 to its highest level in two decades, outpacing supply for the first quarter since 2018. 
  • Office fundamentals have weakened noticeably as leasing remains weak, sublease availability continues to increase and supply comes online.
  • Retail sales slipped in the final three months of the year as service businesses were forced to close or limit operations, creating further headwinds for retail property owners. 
  • The modest recovery in hotel demand also reversed course, further delaying the demand recovery until the virus is no longer a threat.

Want to read the full article?

View PDF

Abigail Rosenbaum

Director

TJ Parker, CFA

Managing Director

Ryan LaRue

Director

Ryan Ma, CFA

Managing Director, Barings Real Estate

Philip Conner

Head of U.S. Real Estate Research & Strategy

Any forecasts in this material are based upon Barings opinion of the market at the date of preparation and are subject to change without notice, dependent upon many factors. Any prediction, projection or forecast is not necessarily indicative of the future or likely performance. Investment involves risk. The value of any investments and any income generated may go down as well as up and is not guaranteed by Barings or any other person. PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.

Any investment results, portfolio compositions and or examples set forth in this material are provided for illustrative purposes only and are not indicative of any future investment results, future portfolio composition or investments. The composition, size of, and risks associated with an investment may differ substantially from any examples set forth in this material No representation is made that an investment will be profitable or will not incur losses. Where appropriate, changes in the currency exchange rates may affect the value of investments. Prospective investors should read the offering documents, if applicable, for the details and specific risk factors of any Fund/Strategy discussed in this material.

Barings is the brand name for the worldwide asset management and associated businesses of Barings LLC and its global affiliates. Barings Securities LLC, Barings (U.K.) Limited, Barings Global Advisers Limited, Barings Australia Pty Ltd, Barings Japan Limited, Baring Asset Management Limited, Baring International Investment Limited, Baring Fund Managers Limited, Baring International Fund Managers (Ireland) Limited, Baring Asset Management (Asia) Limited, Baring SICE (Taiwan) Limited, Baring Asset Management Switzerland Sarl, and Baring Asset Management Korea Limited each are affiliated financial service companies owned by Barings LLC (each, individually, an “Affiliate”).

NO OFFER: The material is for informational purposes only and is not an offer or solicitation for the purchase or sale of any financial instrument or service in any jurisdiction. The material herein was prepared without any consideration of the investment objectives, financial situation or particular needs of anyone who may receive it. This material is not, and must not be treated as, investment advice, an investment recommendation, investment research, or a recommendation about the suitability or appropriateness of any security, commodity, investment, or particular investment strategy, and must not be construed as a projection or prediction.

Unless otherwise mentioned, the views contained in this material are those of Barings. These views are made in good faith in relation to the facts known at the time of preparation and are subject to change without notice. Individual portfolio management teams may hold different views than the views expressed herein and may make different investment decisions for different clients. Parts of this material may be based on information received from sources we believe to be reliable. Although every effort is taken to ensure that the information contained in this material is accurate, Barings makes no representation or warranty, express or implied, regarding the accuracy, completeness or adequacy of the information.

Any service, security, investment or product outlined in this material may not be suitable for a prospective investor or available in their jurisdiction. Copyright in this material is owned by Barings. Information in this material may be used for your own personal use, but may not be altered, reproduced or distributed without Barings’ consent.