Early thoughts on post-pandemic scenarios for commercial real estate

Although we are in early days, one certainty remains: Massive and direct fiscal and monetary stimulus will occur at a level and speed previously unseen. The likely outcome for U.S. real estate will be a period of asset deflation followed by significant and sustained inflation that will, over the long term, drive and distinguish income-producing, hard-asset returns — especially those characterized by high-quality stable tenants. Yet, the timing of this scenario remains guesswork at this early stage. Other strategic factors, a few of which are outlined below, will play out within this “deflation then inflation” backdrop.

Our goal is to set an initial strategic context for the $6 trillion U.S. institutional real estate market and to imagine scenarios that can be revisited and refined over time as the pandemic runs its course. This is an exercise informed by high-frequency inputs from public markets’ history of prior crises and macro observations. We do this to envision p