Quote for Today:

“A bank is a place where they lend you an umbrella in fair weather and ask for it back when it begins to rain.”

– Robert Frost

(Somewhere in Switzerland)

Global real estate services provider JLL sent me its Economic Insights report the other day. While it’s a private publication, I’ve been given free rein to quote it as I’d like. And since I like sharing information with you to improve your investing experience, I’m not going to pass up on this approved opportunity.

Written by JLL Chief Economist Ryan Severino, it begins like this:

Since the beginning of the year, we have emphasized our optimism about the longer-term outlook for both the U.S. and global economies. Growth prospects look favorable through at least the middle of this decade. But we also reiterated that, while we are heading for the light at the end of the long, dark tunnel, we have not reached the end of the tunnel yet.

And we highlighted something unusual: the uncertainty in the economy remains concentrated in the first half of 2021, not the longer-term. That presents an unusual circumstance for economic forecasting because projections typically become uncertain further into the future… the race between positive and negative forces in the economy is on.

Severino fully admits that there’s no reason for premature celebration – a fact that the markets seem to have gotten a clue about this morning. There are renewed virus fears and renewed lockdowns, for one thing, which are leading to more economic pain around the world. And while we’re told that “help is on the way,” we “have not yet reached a turning point where the pandemic begins to subside.”

So what does that mean for commercial real estate, which “takes it cues from the overall economy”?

To answer that question, Severino points out the obvious: that the faster the economy recovers, the faster CRE will. What’s less obvious is how there’s both a positive and a negative side to consider when it comes to how fast everything gets back up and moving like it used to:

“… even though the longer-term outlook for CRE looks favorable, the current race to get through the pandemic could have significant meaning for investors and users of space as they attempt to make important decisions over the next year. A quicker, more successful taming of the pandemic will likely mean market participants will have to make decisions sooner before the recovery manifests itself in the CRE data. A slower recovery means more time to make decisions, but also slightly more pain through a more prolonged downturn.”

So which is it going to be? Obviously, it’s not up to us individually. We can’t just wish it one way or the other.

But we can make sure to be properly placed nonetheless to ride out whatever may still come our way. That requires us to be wise about allocating our investments appropriately, analyzing opportunities as they come, and staying on top of industry news as much as possible.

Which is exactly what our next segment is about, as always.

The World According to Commercial Real Estate

While we don’t have a snapshot of yesterday’s biggest winners and losers, here are some happenings to pay attention to:

• Highwoods Properties (HIW) is already moving and shaking this year, having sold a 100,000 square-foot office building in Atlanta for $30.7 million and buying out its joint venture partner’s 75% interest in Highwoods DLF Forum, which owns a five-building office complex in Raleigh, North Carolina.
• Empire State Realty Trust (ESRT) signed two new leases at its One Grand Central Place building in New York City, one with Belkin Burden Goldman, a real-estate focused law firm; and the other with Dime Community Bank, which has been around for more than a century and a half.
• Farmland Partners (FPI) signed a property sale and long-term management agreements with private investment fund Promised Land Opportunity Zone Farms I.

I’d say it’s clear that, regardless of whether the economic recovery comes fast or slow, these REITs are positioning themselves for positive results.

Happy Investing