Bloomberg Intelligence and Nareit brought together executives from Neuberger Berman and PGIM Real Estate, along with a Nareit economist, for a moderated discussion January 21, 2021 entitled “ COVID and Beyond: The 2021 REIT Market Outlook .” The conversation, moderated by REIT analysts Jeffrey Langbaum and Lindsay Dutch from Bloomberg Intelligence, addressed the REIT property sectors hardest hit by the pandemic and those that benefitted from the socially-distanced economy. The panelists also discussed when they believe economic recovery will begin in the U.S., which REIT property sectors that were impacted will bounce back fastest, and which sectors might deliver the strongest returns for shareholders. Panelists included:
- Brain Jones, Managing Director, Neuberger Berman
- Rick Romano, Managing Director and Head of Global Real Estate Securities, PGIM Real Estate
- Calvin Schnure, Senior Vice President, Research & Economic Analysis, Nareit
The webinar, the first in the 2021 series co-hosted by Bloomberg Intelligence and Nareit, opened with Schnure sharing his 2021 outlook for REITs, which can be found in its entirety here .
Schnure began the conversation by emphasizing that the economic slowdown of 2020 was very different from the recession of 2008, and as a result, the recovery will look very different. “The economy and commercial real estate was hit by an external shock and did not collapse from internal weakness,” said Schnure.
“This means we are not going to see robust economic growth until the pandemic is brought under control. In addition, though, there are some parts of the economy that have shown surprising strength. There has been a lot of damage from the pandemic, but there are parts of the economy that show a lot more strength than they would have in a recession at this point.”
The panelists then went on to discuss the impact of COVID and the outlook for various REIT sectors.
Romano touched on the effect of the pandemic on the office sector and how the remote work that employees experienced during this time will impact the culture of a centralized office. He looks to other parts of the world where work from home is a larger part of the lifestyle. He shared that in the U.S., work from home pre-pandemic was about 5% of the population, whereas in the Netherlands, where there is a more prevalent culture of remote work, it was about 10%, and partial remote work was about 25%.
“Work from home, there is no question that it is going to have an impact on real estate demand,” he said. “It’s a question of does that 5% go to 10%, similar to the Nordics, or does it go up to 20% or 25%.”
Jones discussed the retail sector, which has suffered for quite some time with the growth of e-commerce. Over the last few years, brick-and-mortar retail has seen growth in the low single digits. Meanwhile, e-commerce sales have grown low double digits and saw nearly 30% growth in 2020.
“One thing to consider is that some of the retail sectors were experiencing some weakness even before the COVID crisis,” Jones said. “The COVID crisis obviously highlighted and emphasized some of these struggles.”
However, he says there is a reason for optimism. Share prices of retailers have sharply recovered in recent months, even though sales trends are still somewhat weak. The vaccine rollout will also have a positive impact on retail.
“We are looking toward the reopening of normal behaviors. Once people are vaccinated, we think that people will turn back to their more social behaviors - restaurants, gyms, in-person shopping,” Jones said. “So, there may be some pent-up demand for the activities that take place in retail sectors.”
A replay of the Bloomberg Intelligence-Nareit webinar can be found by registering here .