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OUR COMPANY AFFILIATES

CBRE GROUP

CBRE Group, Inc. is the world’s largest commercial real estate services and investment firm, with 2017 revenues of $14.2 billion and more than 80,000 employees (excluding affiliate offices). CBRE has been included in the Fortune 500 since 2008, ranking #207 in 2018. CBRE offers a broad range of integrated services, including facilities, transaction and project management; property management; investment management; appraisal and valuation; property leasing; strategic consulting; property sales; mortgage services and development services.

INVESTMENT SERVICES

CBRE Global Investors, combined with CBRE Clarion Securities and CBRE Caledon, is one of the world’s leading real asset investment managers with $105 billion in assets under management.

Built up over more than 40 years, our unparalleled platform is focused on real assets, giving our institutional clients access to real estate and infrastructure in the Americas, Europe and Asia Pacific. Our clients benefit from a complete range of investment solutions including equity and debt, direct and indirect, and listed and unlisted strategies.

Trammell Crow Company, founded in Dallas, Texas in 1948, is one of the nation’s oldest and most prolific developers of, and investors in, commercial real estate.The CBRE Global Investors and Trammell Crow Company platforms make up the Real Estate Investments division of CBRE Group.

The Real Estate Investments division is led by
Danny Queenan, Global CEO, Real Estate Investments.

BLOGS

Regularly released content on the state of the real estate and infrastructure industry are produced by our subject matter experts and shared on their blogs. A selection of them can be found below.

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U.S. EARLY INDICATORS

Q2 2019
MODERATING GROWTH ON THE HORIZON
REAL ESTATE REMAINS FAIRLY PRICED

Following the spike in corporate bond yields through a turbulent 4Q18, yields declined through the first quarter of 2019. Positive signals on the health of the U.S. economy and the Fed’s reversal on interest rates mollified corporate bond markets. Cap rates were relatively unchanged during this time. As a result, the cap-rate-to-corporate-bond ratio rose modestly to 114 bps in 1Q19. Although the spread is below its long-term historical average of 118 bps, it remains within one standard deviation of this average, indicating that commercial real estate remains fairly priced relative to fixed-income alternatives.

Sources: Oxford Economics, NCREIF, Green Street, Real Capital Analytics
LISTED SECTOR REGAINS ITS FOOTING

Following a lackluster performance through the final months of 2018, the listed real estate sector regained its footing through the early part of 2019, resulting in a total return of 15.9% in 1Q19. In contrast to the listed sector’s recent volatility, private real estate remained steady, generating a return of 1.8% during the first three months of 2019, supported by steady income returns and modest improvement in capital growth relative to recent quarters.

Sources: NCREIF; NAREIT. Both indices rebased to 100 on June 30, 2006
FLATTENING YIELD CURVE RAISES RED FLAGS

The term spread continued to tighten through May 2019, reaching its lowest level this cycle – a reflection of growing investor uncertainty about economic growth going forward. The 3-month/10-year Treasury spread contracted to single-digit basis points, as a yield curve inversion appears increasingly likely. With no rate hikes expected through the remainder of 2019, upward pressure on short-term rates will recede, while this still- accommodative interest rate environment should also promote growth, rising inflation and a widening term spread. The reliability of the yield curve as a growth indicator has come into question, given the artificial constraints on the term premium resulting from quantitative easing (QE). Although QE has likely distorted the timing between yield curve inversion and recession, the shape of the yield curve remains a valuable early indicator.

Source: Federal Reserve
TEMPERED OPTIMISM

Supported by continued employment growth, the recent rebound in stock prices, and improved consumer expectations, the leading economic indicators index increased by 0.1% from the previous month to 111.9 in March 2019. Despite the gains through the early part of 2019, the index’s more modest performance in recent months portends a deceleration in economic growth over the near term.

Source: The Conference Board Index is comprised of ten economic indicators, including average production work week, initial unemployment claims, manufacturers new orders, vendor performance, supplier deliveries, building permits, stock prices, money supply, consumer expectations, and interest rate spreads.
HOW LOW CAN IT GO?

After trending up through late 2018 and breaching the 4.0% mark in January 2019, the unemployment rate declined in subsequent months. The unemployment rate reached a new cyclical-low, slipping to 3.6% through April 2019, supported by healthy employment growth. Through the first four months of 2019, the monthly pace of job creation averaged 205,000 jobs – a pace on par with the rate of employment gains observed in recent years.

Source: BEA
PRINCIPAL CONTRIBUTOR:
 
Jeremiah Lee
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This information is for our clients and investors only. Please note that the content of this report is for informational purposes only and should not be viewed as investment advice or an offer or solicitation. Any opinions are solely those of the Strategy & Research Team of CBRE Global Investors and are subject to change without notice, and may not be consistent with market trends or future events. This research is based on current public information that we consider reliable, but we do not represent it as accurate, updated or complete, and it should not be relied on as such.

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