CBRE GLOBAL ECONOMY DECK

STRONG RECOVERY ON TRACK, OLD RISKS RETURN .

12 APRIL 2021

Dr. Richard Barkham Global Chief Economist & Head of Americas Research CBRE Research

UNITED STATES

U.S. HITS PEAK GROWTH IN 2021 BASED ON STIMULUS Annual GDP Growth Rate

U.S.

Euro Area

U.K.

8

6 4

2

Percent

0 -2 -4 -6 -8 -10 -12 2018 Source: CBRE House-View, April 2021.

2019

2020

2021

2022

2023

BACK TO FULL EMPLOYMENT IN 2021

Real GDP growth and headline unemployment rate (%) 2021 Full-Year GDP Growth Forecast

2021 Unemployment Rate

Oxford Economics

7.2

Oxford Economics

4.6

Goldman Sachs

7.7

Goldman Sachs

4.1

WSJ Concensus

5.9

WSJ Concensus

5.0

Moody's

4.9

Moody's

4.8

Wells Fargo

7.6

Wells Fargo

4.7

CBRE

6.7

CBRE

4.6

IHS Markit

5.9

IHS Market

4.7

6.6 Average Source: WSJ Econ Survey, CBRE Research, April 2021.

4.6 Average

SUBSTANTIAL JOB OPENINGS REMAIN UNFILLED Percent of jobs openings not able to fill right now 45% 40% 35% 30% 25% 20%

15% 10% 5% 0% 2000

2002

2004

Source: NFIB, CBRE Research, March 2021.

2006

2008

2010

2012

2014

2016

2018

2020

AND BUSINESS CONFIDENCE IS HIGHLY ROBUST Business confidence index, Composite Markit PMIs 65

Manufacturing US

Euro Area

UK

China

Japan

Index>50 = Expansion

60

70

Services US

Euro Area

UK

China

Japan

60

55 50 50 40 45 30

40 35

20

30

10

25 Feb-19

Aug-19

Feb-20

Aug-20

Feb-21

Source: Markit Business Survey, Macrobond, CBRE Research, March 2021.

0 Feb-19

Aug-19

Feb-20

Aug-20

Feb-21

DESPITE IMPROVEMENT COVID REMAINS THE KEY THREAT

U.S. Daily new cases & deaths, and total currently hospitalized (7-day moving average) New confirmed cases per day (lhs)

Currently hospitalized (lhs)

Deaths per day (rhs)

300,000

6,000

250,000

5,000

200,000

4,000

150,000

3,000

100,000

2,000

50,000

1,000

0 Mar-20

0 Apr-20

May-20

Jun-20

Jul-20

Aug-20

Sep-20

Oct-20

Nov-20

Source: US Dept. of Health and Human Services, Oxford University, CBRE Research, 12 Apr 2021.

Dec-20

Jan-21

Feb-21

Mar-21

CASES ARE RISING SHARPLY IN NORTHERN STATES Hospital patients per 100,000 (7-day average) 800

Patients per 100,000 (7-Day MA)

700 600 500 400 Michigan 300

New York New Jersey

200 Florida 100 0 Nov-20

Dec-20

Jan-21

Source: US Dept of Health and Human Services, FT, CBRE Research, 12 Apr 2021.

Feb-21

Mar-21

Apr-21

IT’S THE YOUNGER DEMOGRAPHIC IN COLDER CLIMATES Michigan vaccination rate and hospitalization rate since Mar 1 Vaccination rate (%)

Increase in hospitalizations since Mar 1 (%) 18-29

30-39 40-49 50-59 60-69 70-79 80+ 50

40

30

20

10

0

0

Source: Michigan Health and Hospital Association, FT, CBRE Research, 9 Apr 2021.

200

400

600

800

1,000

VIRUS-HIT SECTORS ARE IMPROVING

Passengers at airport security, YoY % 7-day moving average -40%

Chart compares 2021 data to 2019 from March 1, 2021 onwards

Y-o-Y Change (%)

-50%

-60%

-70%

-80%

-90%

-100% Mar-20

Apr-20

May-20

Source: TSA, CBRE Research, 6 Apr 2021.

Jun-20

Jul-20

Aug-20

Sep-20

Oct-20

Nov-20

Dec-20

Jan-21

Feb-21

Mar-21

THE LEISURE SECTOR IS BOUNCING BACK

Y-o-Y change in OpenTable restaurant booking (7-Day Moving Average) California

40%

New York

Texas

Florida

Michigan

% Change from 2019, 7-Day MA

20% 0% -20% -40% -60% -80% -100% Sep-20

Oct-20

Source: OpenTable, 6 Apr 2021.

Nov-20

Dec-20

Jan-21

Feb-21

Mar-21

REITS HAVE GAINED SUBSTANTIALLY IN 2021 – ALL SECTORS! U.S. REIT Index by sectors 140 120

Industrial Self Storage

100

Health Care Apartments

80 60

Office Strip Centers Retail

40

Hotels Malls

20

Source: Wilshire Associates Incorporated, CBRE Research, 9 Apr 2021.

RISK SPREADS DANGEROUSLY LOW

U.S. BBB-rated corporate bond yield spread over 10-year treasury (%)

BBB-rated Corporate Bond Yield

10-Year Treasury Yield

(Bps)

Spread (rhs)

14

800

12

700

10

600

8

500

6

400

4

300

2

200

0 2007

100 2008

2009

2010

2011

Source: Macrobond, CBRE Research, 11 Apr 2021.

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

EXPECT A LOT OF NOISE ABOUT INFLATION THIS WEEK Consumer Price Index (Y-o-Y Change, %) US

4.0

EU

UK

Japan

Y-o-Y Change (%)

3.0 2.5% 2.0

1.0

0.0

-1.0

-2.0 2012

2013

2014

2015

Source: National Sources, Macrobond, CBRE Research, 2020.

2016

2017

2018

2019

2020

UKRAINE

PAGE HEADING HEADING

Second level • Third level – Fourth level • Fifth level

TAIWAN

2021 2022

Source: CBRE Research, CBRE Econometric Advisors Q4 2020.

2023 2021-2023 cumulative

Memphis

Atlanta

Las Vegas

Miami

San Antonio

Toledo

Portland

Rents down

Cleveland

Raleigh

Sacramento

Orlando

Jacksonville

Tampa

Hartford

Salt Lake City

New York

Denver

Chicago

Boston

Detroit

Fort Worth

Los Angeles

Seattle

Philadelphia

Dallas

Phoenix

Austin

San Francisco

Houston

San Diego

San Jose

UNITED STATES OFFICE – STILL A BIT FROZEN

3-Year Office Downtown Rental Forecast Rents up

15%

10%

5%

0%

-5%

-10%

-15%

-20%

M&A ACTIVITY SUGGEST CAPITAL MARKETS ACTIVITY ABOUT TO SURGE Global CRE Capital Flows and M&A Deal Value(USD Billions, TTM) 1,400

4,500 Global CRE Capital Flows (TTM, LHS)

1,200

Global M&A Deal Value (TTM, RHS) 4,000 3,500 3,000

800

2,500

600

2,000

400

1,500 1,000

200 0

Source: CBRE Research, Q4 2020.

500 0

USD Billions

USD Billions

1,000

THE DOLLAR IS WEAK – U.S. ASSETS ARE CHEAP U.S. Nominal Trade-weighted Dollar Index 130

120

110

100

90

80 2007

2008

2009

2010

2011

2012

2013

Source: Census Bureau, Macrobond, CBRE Research, 12 Apr 2021.

2014

2015

2016

2017

2018

2019

2020

2021

PAGE HEADING HEADING

Second level • Third level – Fourth level • Fifth level

EUROPE

EUROPE PEAKS OUT IN 2022 Annual GDP Growth Rate

U.S.

Euro Area

U.K.

8

6 4

2

Percent

0 -2 -4 -6 -8 -10 -12 2018 Source: CBRE House-View, April 2021.

2019

2020

2021

2022

2023

NEW VARIANTS AND SLOW VACCINE ROLL OUT Daily new cases in 7-day moving averages 70,000 60,000

Number of Cases

U.K. 50,000 40,000 France

Spain 30,000

Italy

20,000

Germany

10,000 0 0

25

50

75

100

125

150

175

200

225

250

275

Days Since Daily Increase Exceeds 100 Source: CBRE Research, University of Oxford, COVID Tracking Project, Macrobond, 12 Apr 2021.

Note: Number reported as a 7-day moving average.

300

325

350

375

400

425

450

EUROPE PLAYING CATCH UP IN RACE TO HERD IMMUNITY Share of population that has received at least one dose United States

Europe

United Kingdom

Percent of Population that Received One Dose

100 90 U.S. – July 70% Threshold reached

80 70

Herd Immunity range = 70%

60

U.K. – August Threshold reached

50

Europe – November Threshold reached

40 30 20 10 0 Jan-21

Forecast Feb-21

Mar-21

Apr-21

May-21

Jun-21

Jul-21

Aug-21

Source: Our World in Data, Macrobond, CBRE Research, 8 Apr 2021. *Note: Forecast for U.S. provided by NYT, Forecast for Europe and U.K. by GS Investment Research

Sep-21

Oct-21

Nov-21

VACCINE AVAILABILITY HAS SLOWED PROGRESS – NOT FOR MUCH LONGER Reported COVID-19 vaccine production capacity (billions of doses) 40 35

VLP

Billions of Doses

30

RNA (Moderna & Pfizer-BioNTech)

25

Replicating viral vector

20

Protein subunit (Novavax & Vector Institute)

15

Non-replicating viral vector (J&J and AstraZeneca-Oxford)

10

Live attenuated Inactivated (Sinopharm & Bharat Biotech)

5

DNA

0 Q4 2020 Source: UNICEF, 2021.

H1 2021

H2 2021

2022

2023

BUSINESS CONFIDENCE IN EUROPE RISING ANYWAYS Europe Business confidence index, Composite Markit PMIs Manufacturing

Services 70

70

Index > 50 = Expansion

Germany

France

Italy

60

60

50

50

40

40

30

30

20

20

10

10

0

0 Jan-19

May-19

Sep-19

Jan-20

May-20

Germany

United Kingdom

Sep-20

Jan-21

Source: Markit Business Survey, Macrobond, CBRE Research, March 2021.

Jan-19

May-19

France

Sep-19

Jan-20

Italy

May-20

United Kingdom

Sep-20

Jan-21

Source: CBRE Research, Q4 2020.

2021 2022 2023 2021-2023 cummulative

Stockholm

La Defense

Frankfurt

Warsaw

Paris (Northern Paris)

Edinburgh

Glasgow

Bristol

Madrid

Birmingham

Dusseldorf

Barcelona

Mild rental inflation

Vienna

Luxembourg City

Copenhagen

Istanbul

Prague

Helsinki

London (Docklands)

London (West End)

Manchester

Rotterdam

Brussels

Leeds

Bratislava

Marseille

The Hague

Munich

Utrecht

Rents down

Paris (CBD)

Dublin

Oslo

15%

Lyon

Paris (WC)

EUROPE OFFICE IN REASONABLE SHAPE

3-Year Office Prime Rental Forecast Rents up

10%

5%

0%

-5%

-10%

PAGE HEADING HEADING

Second level • Third level – Fourth level • Fifth level

ASIA PACIFIC

CHINA PEAKS IN 2021 – ALREADY TIGHTENING Annual GDP Growth Rate

U.S.

Euro Area

U.K.

Asia Pacific

China

8

Percent

3

-2

-7

-12 2018 Source: CBRE House-View, April 2021.

2019

2020

2021

2022

2023

INDIA REOPENING SEES SURGE IN CASES Daily new cases in 7-day moving averages 14,000

160,000 India (rhs)

Number of Cases

12,000

140,000 120,000

10,000

Philippines 100,000

8,000

80,000 6,000

60,000

Indonesia

4,000

40,000

Japan 2,000

Malaysia China

0 0

25

50

75

100

125

150

175 200 225 250 275 300 Days Since Daily Increase Exceeds 100

Source: CBRE Research, University of Oxford, COVID Tracking Project, Macrobond, 12 Apr 2021.

Note: Number reported as a 7-day moving average.

325

350

375

400

425

450

20,000 0

APAC VACCINE ROLLOUT LAGS OTHER REGIONS Percent of population that received one dose Asia

% of population that received one dose

7

Japan

Malaysia

Indonesia

India

6 5 4 3 2 1 0 24/12/2020

7/1/2021

21/1/2021

4/2/2021

Source: Our World in Data, Macrobond, CBRE Research, 12 Apr 2021.

18/2/2021

4/3/2021

18/3/2021

1/4/2021

APAC AHEAD IN RETURN TO NORMALCY ANYWAY Retail, Transit, Workplace Average weighted by GDP

Americas

Change from Pre-Pandemic Levels

10

EMEA

APAC

0 -10 -20 -30 -40

-50 -60 -70 Feb-20

Mar-20

Apr-20

May-20

Jun-20

Jul-20

Source: Google Mobility Index, CBRE Research, 7 Apr 2021.

Aug-20

Sep-20

Oct-20

Nov-20

Dec-20

Jan-21

Feb-21 Mar-21

BUSINESS CONFIDENCE INDICATES ROBUST EXPANSION Business confidence index, Composite Markit PMIs Manufacturing

65

China

Japan

India

70

Australia

60

Index>50 = Expansion

Services China

Japan

India

Australia

60

55 50 50 40 45 30

40 35

20

30

10

25 Jan-19

May-19

Sep-19

Jan-20

May-20

Sep-20

Jan-21

Source: Markit Business Survey, Macrobond, CBRE Research, March 2021.

0 Jan-19

Jul-19

Jan-20

Jul-20

Jan-21

APAC OFFICE REASONABLY GOOD

3-Year Office Grade A Net Effective Rental Forecast Rents up

Rents down 20% 15% 10% 5% 0% -5% -10% -15%

2021 Source: CBRE Research, Q4 2020

2022

2023

2021-2023 cummulative

Sydney

Melbourne

Singapore

Perth

Ho Chi Minh City

Auckland

Brisbane

Taipei

Bangalore - ORR

Seoul

Hanoi

Manila Makati

Guangzhou

Beijing

Mumbai - ABD

Shenzhen

Shanghai

Tokyo

Hong Kong

-20%

CONCLUSIONS •

Global recovery remains on track

•

Likely 24 months of really strong growth, then a substantive easing

•

Property sentiment is improving everywhere, but will lag the economic cycle

•

Particularly in the office sector

•

Expect strong U.S. and Global capital markets activity

•

Geopolitical risks also bounce back

THANK YOU! PLEASE DON’T HESITATE TO CONTACT US. Daniel Chang Global Research Analyst Economics & Capital Markets CBRE Research +1 617 912 5254 daniel.chang@cbre.com

Wei Luo Global Associate Director Economics & Capital Markets CBRE Research +1 212 984 8153 wei.luo@cbre.com

Dr. Richard Barkham Global Chief Economist & Head of Americas Research CBRE Research +1 617 912 5215 richard.barkham@cbre.com

This presentation has been prepared in good faith based on CBRE’s current views of the commercial real-estate market. Although CBRE believes its views reflect market conditions on the date of this presentation, they are subject to significant uncertainties and contingencies, many of which are beyond CBRE’s control. In addition, many of CBRE’s views are opinion and/or projections based on CBRE’s subjective analyses of current market circumstances. Other firms may have different opinions, projections and analyses, and actual market conditions in the future may cause CBRE’s current views to later be incorrect. CBRE has no obligation to update its views herein if its opinions, projections, analyses or market circumstances later change.

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