March 19, 2020
Looking at the current macroeconomic environment from an altitude of 30,000 square feet, Dr. Komal Sri-Kumar, president of Sri-Kumar Global Strategies, sees a domestic and global economy that was already slowing down for some time prior to the upheaval of the coronavirus epidemic. Skeptical that the U.S. economy was as strong as the current administration claimed, he had predicted a recession by mid-2020 even before COVID-19. The epidemic, he said, will only deepen it.
Sri-Kumar provided his forecast to set the stage for Walker & Dunlop’s “Navigating the Markets” webcast, held March 18. He expects that we’ll see a 7% quarterly decline in GDP for the second quarter. If the epidemic proves to be more serious and government response is unsuccessful, a quarterly drop of 10% is possible.
2021, though, will be “a year of economic recovery,” Sri-Kumar said. On the commercial real estate front, we’re likely to see cap rates increase before that recovery kicks in.
Coming in for a view from 10,000 feet, Walker & Dunlop CEO Willy Walker assessed the current state of financing and demand in each of the five major food groups, amid an epidemic that has Walker and his company’s employees working remotely. Unsurprisingly, the apartment sector is faring best of all, he said.
“Multifamily is still extremely active; there’s plenty of demand for Fannie, Freddie and HUD paper,” Walker said. Industrial also continues to do well, but Walker cited increasingly high hurdles for obtaining debt and equity in discussing office, retail and, most challenged of all at present, lodging.
During the hour-long webinar, Walker also discussed the current realities of getting deals done, including the activity levels of various debt and equity sources and their potential for responding to market opportunities as they arise.
Further, he provided encouragement that eventually, we’ll see COVID-19 in the rear-view mirror and come out on the other side of the crisis. Citing the examples of China and South Korea, which are moving into recovery, he said, “We clearly know what the other side looks like.” He and Sri-Kumar also answered as many audience questions as time permitted.
On-demand replays of the webinar are available by clicking here.
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