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 July 2, 2020  

Disruption 2020: Unlocked Insights Part 1 - Macro Takeaways

Colliers Capital Markets advisors have their fingers on the pulse of the market. From conversations with buyers, sellers, capital sources, occupiers and other market participants, they are connecting the dots. We sat down with several of our advisors to better understand the trends they’re hearing about and seeing in the market today. Below are several takeaways and recurrent themes.

CM_Unlocked Insights_macro takeaways

  • Global institutions are focused on the need to deploy capital and are beginning to behave and price in a pre-COVID-19 manner. They are focused on yield durability.

  • It’s all about the debt markets today; they’re priming the transaction pump.

    • Money center banks are not as active, but local and regional banks have stepped into the void, though they’ve focused on lower-dollar loans. Life companies are coming back and have money to put out the door.

    • Stabilizing the CMBS, floating-rate and debt-fund markets is key.

    • Debt funds are not lending as they once did — warehouse lines are getting called, hampering their ability to function in the marketplace.

  • A higher degree of scrutiny (from lenders and investment committees) of associated assumptions, especially rent rolls, rent levels, rent growth and assessment of tenancy has almost become a forensic exercise. It is no longer about the capitalization rate.

  • The highest bidder in the past was often the highly levered buyer; that buyer is at a disadvantage today.

  • Core product capitalization rates may go lower than they were at pre-COVID-19 levels due to the ongoing low-interest-rate environment, but may rise during this near-term uncertainty.

  • Wider variance in value-add pricing is likely to be driven by uncertainty on rents, tenant demand, downtime and COVID-19-related tenant improvement costs.

  • Buyers are looking, but few are acting. Many want distress, which will take time to manifest.

  • Private buyers, such as high-net-worth individuals and family offices, are the main game in town — institutional money that has driven urban markets has been frozen, but is starting to thaw.

  • Certain sectors and companies within corporate America will look to monetize their real estate via sale/leaseback or disposing of excess space to stabilize balance sheets.

  • There is more comfort in the market. More deals will be brought out after Independence Day.


Aaron Jodka
Managing Director, Research & Client Services
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