US commercial property values may take a short-term hit from the disruption caused by the coronavirus pandemic, but there is no reason to believe it will have a lasting impact on the market, CBRE says.

The US Federal Reserve responded on Sunday to the deteriorating economic outlook stemming from the COVID-19, cutting short-term interest rates to a target range of 0 per cent to 0.25 per cent, while also restarting purchases of government and mortgage-backed securities (quantitative easing) and ensuring the availability of dollars to foreign central banks (including Canada, the U.K., the European Union and Switzerland) via enhanced swap lines.

Impact of Covid_19 on US commercial market - At a glance: 

• Industrial: Simultaneous supply and demand shocks—supply-chain disruptions and less demand due to an economic slowdown—will impact industrial properties. This will be counterbalanced by more people shopping for goods online, which likely will bolster demand for last-mile distribution space.
• Office: Slowing economic growth will put leasing on hold, pushing up vacancy. This is particularly true for travel and oil & gas industries. 
• Retail: Bans on various gatherings and restrictions on retail sites, including food & beverage establishments, have already materially lowered consumption, especially in high-traffic properties like malls. 

In addition, the Fed encouraged financial institutions to use intraday credit facilities and capital and liquidity buffers—built up after the Global Financial Crisis—to aid prudent lending to households and businesses during this time of economic strain. 

CBRE Global Chief Economist & Head of Americas Research Richard Barkham said while economic impacts would increase as more aggressive measures were taken to combat the virus, it was important to remember that US economy and commercial property market fundamentals were on firm footing coming into this "unprecedented period". 

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

"The government’s next fiscal response will range in the hundreds of billions of dollars to address businesses particularly affected by the crisis, such as airlines and small businesses, as well as additional measures to shore up the consumer," he said.

"Policymakers retain a wide range of options and will act aggressively, especially because this is an election year. For this reason, the most extreme impacts on commercial real estate likely will be somewhat short-lived."

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