The Weekly Briefing - June 8th, 2020

It’s Official: We Are in a Recession The National Bureau of Economic Research (NBER) announced Monday that the recession started in February 2020. The Business Cycle Dating Committee of NBER maintains the chronological history of peaks and troughs of the U.S. economy. The expansion, which lasted 128 months, was the longest in the history since recording began in 1854. The committee dated the quarterly peak as having occurred in Q4 2019—while these peaks occur in different quarters, it is consistent with NBER policy. The committee was clear in noting that this recession may be briefer than earlier contractions. While they weigh the depth of the contraction, its duration, and the breadth of economic decline, due to “the unusual nature of this recession” the committee felt it was appropriate to call the recession prior to seeing two full quarters of contraction.

Census Bureau Survey Sheds Light on Household Financial Picture Nearly two-thirds of households across the U.S. have lost employment income since mid-March, according to the Census Bureau’s most recent Household Pulse Survey, as layoffs and hour reductions pushed many Americans into precarious financial positions. In addition, the survey found that more than half of households expect to experience wage losses in the next four weeks, highlighting widespread concern about job security that is almost certainly undercutting consumer sentiment. The Census Bureau conducted the survey between May 21st and May 26th before last week’s job report showed relative improvement in the labor market. It will likely take a few weeks before we see positive figures from the jobs report affect Americans’ sentiment about coming job losses. The Census Bureau has published four weekly editions of the Household Pulse Survey so far, and high-level figures have been relatively consistent over time. The Census Bureau has broken out survey results for seven Bridge Target Markets. Households in each of these metros have experienced lower employment income losses than the national level. Household sentiment is correspondingly more optimistic in these markets. Share of Households that Have Lost Employment Income Since March 13th & Share of Households that Expect to Lose Employment Income in the Next Four Weeks

States Moving to Restart Economic Activity Nearly three months after governments first declared stay-at-home orders and business restrictions, every state in the U.S. has started lifting restrictions on daily activity, largely driven by the need to revive moribund economies. But the moves could risk a resurgence of virus cases as no state meets the federal government’s core guideline that restrictions remain in place until reported cases decline for two weeks. The inconsistency in testing across states makes an across-the-board statement about COVID-19 cases difficult. Some states seen rising numbers of cases coupled with rising testing levels, while in other states testing continue to lag. So far, Idaho, Oregon, and Colorado have conducted the fewest tests when measured as a share of state population. On the other end of the spectrum, Rhode Island, New York, and New Mexico lead the country in number of tests conducted, suggesting these states may be better positioned to quickly identify new outbreaks and take responsive measures.

Downtown Areas Showing More Signs of Softening than the Suburbs Multifamily data recently collected by CoStar suggests the virus outbreak and related economic downturn may be taking a greater toll on downtown areas than on suburban submarkets. During May, CoStar contacted 8,000 landlords and found that 56% of properties in the urban core reported rising vacancies compared to 39% in suburban areas. Rent trends are exhibiting a similar pattern as advertised urban asking rents have fallen more than 2% since peaking in early March compared to approximately 1% for suburban rents. In addition, the share of downtown communities offering rent concessions stands at 56%, substantially higher than the 30% of properties in the suburbs. Share of Landlords Reporting Higher Vacancies During May

Further Signs Indicating that Labor Markets are Stabilizing The jobs report released on Friday captured many headlines because of an unanticipated improvement in the official unemployment rate from 14.7% in April to 13.3% in May as 2.5 million workers were added to payrolls on net. The U-6 unemployment rate, which includes discouraged workers and part-time workers seeking full-time jobs, remained well above historic norms but also declined from 22.4% to 20.7%. Meanwhile, the labor force participation rate increased by 0.6 percentage points, which typically indicates improved sentiment regarding job prospects. Official unemployment figures should continue to be taken with a grain of salt, however, as the Bureau of Labor Statistics reported large numbers of survey participants continue to fill out the survey incorrectly. If these individuals had been correctly classified, the actual unemployment rate would have come to 16.3%, down from approximately 20.0% in the month prior. Data provided by Moody’s Analytics tell a similar story of modest improvement in the labor market as the number of layoffs during May represented a 40.8% decline compared to April figures. Subsectors with Largest Job Declines in May                               Subsectors with Largest Job Gains in May

Congressional Budget Office (CBO) Projections Underscore Long-Term Impact of the Coronavirus Estimates released last week by the non-partisan CBO suggest the pandemic and ongoing downturn will have long-term implications for the health of the U.S. economy. The CBO marked down its 10-year projections for GDP by $15.7 trillion, or 5.3%, relative to its forecast from January of this year. The projections also call for GDP to finish the year 5.6% lower than the Q4 2019 figure as expected rapid economic expansion later this year will likely be insufficient to make up for earlier shortfalls. The CBO did caution, however, that its forecasts are likely to evolve because of “an unusually high degree of uncertainty” about how the pandemic and government restrictions will unfold over the next two years.

Disclosures and Disclaimers

This is a general analysis of the real estate market prepared by Bridge Investment Group LLC (“Bridge”) and is not related to any specific products or services of Bridge or any affiliate. Sources for statistics and other factual data included herein are maintained by Bridge Research. Such data has not been verified by Bridge and we can give no assurance that it is accurate or complete. Statements contained herein that are nonfactual constitute opinions of Bridge, which are subject to change. Financial projections contained herein are estimates only and are based on assumptions, including assumptions regarding future rent growth, the availability and cost of financing, changes in market capitalization rates, and various micro- and macro-economic trends. No assurance can be given that either the projections or the assumptions will prove to be accurate. Investment in real estate involves substantial risk of loss.

This analysis contains various forward-looking statements that are not historical in nature. You are cautioned not to place undue reliance on any of these forward-looking statements, which reflect our views as of the date of this presentation. Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Although we believe that the expectations reflected in such forward-looking statements are based on reasonable assumptions, our actual results and performance could differ materially from those set forth in the forward-looking statements and we cannot guarantee future results or the successful implementation of the strategies discussed in this presentation. We are under no duty to update any of the forward-looking statements after the date of this presentation to conform these statements to actual results. Certain information contained herein has been obtained from published sources, agencies of the U.S. government and from third-parties, including without limitation, market forecasts, market research, publicly available information and industry publications. Although such information is believed to be reliable for the purposes used herein, Bridge does not assume any responsibility for the accuracy or completeness of such information. Similarly, forecasts or market research, while believed to be reliable, have not been independently verified and Bridge does not make any representation as to the accuracy or completeness of such information. All information is provided on an “as is” basis only. By using this information, the reader agrees that Bridge shall not have any liability for the accuracy of the information contained herein, for delays or omissions therein, or for any results based on your use of the information which are not consistent with your objectives. Without limiting the foregoing disclaimers, the information provided herein is not guaranteed to be accurate or complete, nor does Bridge take responsibility for it. The information contained herein has not been audited and Bridge does not guarantee its suitability for any purpose. All information is subject to change and/or withdrawal at any time without notice. Certain information included herein may refer to published indices. Indices that purport to present performance of certain markets or the performance of certain asset classes or asset managers may actually present performance that materially differs from the overall performance of such markets, asset classes or asset managers.

Past performance is not a reliable indicator of future results and should not be the sole factor of consideration when selecting a product or strategy. Any research in this document has been procured and may have been acted on by Bridge for its own purpose. The results of such research are being made available only incidentally. The views expressed do not constitute investment or any other advice and are subject to change. They do not necessarily reflect the views of Bridge or any of its affiliates and no assurances are made as to their accuracy.

This document is for information purposes only and does not constitute an offer or invitation to anyone to invest in any Bridge funds and has not been prepared in connection with any such offer.

Copyright 2020, Bridge Investment Group LLC. “Bridge Investment Group” and certain logos contained herein are trademarks owned by Bridge.