DR. RICHARD BARKHAMGlobal Chief Economist & Head of Americas Research CBRE Research

GLOBAL ECONOMICAND REAL ESTATE OUTLOOK

.

COVID-19 AND EMERGING MARKETS

2 JUNE 2020

THE CURVE IS ALMOST BENT IN THE DEVELOPED WORLD Cumulative number of confirmed cases, by number of days since 100th case

Source: Financial Times, CBRE Research, European Centre for Disease Prevention, Macrobond, 2 Jun 2020.

USA

Italy

China

South Korea

France

Japan

100

1,000

10,000

100,000

1,000,000

0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95 100 105 110 115 120 125

Num

ber

of C

ases

…EVERY 2 DAYS

…EVERY 3 DAYS

…EVERY WEEK

Days Since 100 Cases

Spain

Germany

U.K.

CASES DOUBLE EVERY DAY

World

ItalySouth Korea

China

Spain

Germany

UK

France

Japan

New York State

USA excl. NY (right axis)

0

5,000

10,000

15,000

20,000

25,000

30,000

0

2,000

4,000

6,000

8,000

10,000

12,000

0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95 100 105 110 115

Num

ber

of C

ases

WE ARE GENERALLY PAST THE PEAK IN NEW INFECTIONSDaily new cases in 7-day moving averages

Source: CBRE Research, European Centre for Disease Prevention, COVID Tracking Project, Macrobond, 2 Jun 2020.Note: Number reported as a 7-day moving average.

USA an outlier –why? Is it a risk?

Days Since Daily Increase Exceeds 100

DEVELOPED ECONOMIES ARE MOVING OUT OF LOCKDOWNGDP-lead indicator and lockdown stage comparison

SEMI-EASING LOCKDOWNRECESSION

GRADUAL OPENINGSTABLIZATION

70% NORMAL LIFEGROWTH

LOCKDOWNFREEFALL

China

CanadaAustralia

USASpain

Austria DenmarkCzechNorway

FranceItaly

Netherlands

NO LOCKDOWN• South Korea• Taiwan• Japan• Sweden

Source: CBRE Research, 2 Jun 2020.* Iran re-lockdown one province due to a second-wave increase of cases.

UKSingapore

TurkeyRussia

Brazil

GermanySwitzerland

IndiaPeruIran*

PortugalBelgium

WHAT IS THE SHAPE OF RECOVERY?Stylized GDP growth trajectory

WHAT IS THE SHAPE OF RECOVERY?Stylized GDP growth trajectory

WHAT IS THE SHAPE OF RECOVERY?Stylized GDP growth trajectory

U.S. ECONOMY REBOUNDS, DRIVEN BY RETAIL SALES The U.S. Weekly Economic Index

Source: Federal Reserve Bank of New York, May 2020.

-9.9

-12

-10

-8

-6

-4

-2

0

2

4

6

Perc

ent (

GD

P G

row

th U

nits

)

CHINA IS BOUNCING BACK NICELY AFTER END TO LOCKDOWNCurrent Economic Activity Indicator

Source: CBRE Research, May 2020.

2%

-4

-3

-2

-1

1

2

-10

-5

0

5

10

15

20

Econ

omic

Act

ivity

Indi

cato

r

Real

GD

P G

row

th (Y

-o-Y

, %)

Real GDP Growth (lhs) CBRE Current Activity Indicator (rhs)

WE EXPECT A RELATIVELY RAPID BOUNCE BACK IN THE USU.S. unemployment rate, 16 years old and above

Source: BLS, CBRE Research, May 2020.

Forecast

0

2

4

6

8

10

12

14

16

18

20

Une

mpl

oym

ent

Rate

(%)

Peak at 18.1% 12.5% by

end of 2020

PENT UP DEMAND

-100

-80

-60

-40

-20

0

20

40

2/18 2/25 3/3 3/10 3/17 3/24 3/31 4/7 4/14 4/21 4/28 5/5 5/12 5/19 5/26

Y-o-

Y C

hang

e (%

)

United States United Kingdom Germany Australia Mexico

SIGNS OF LIFE IN THE RESTAURANT SECTORY-o-Y change in OpenTable restaurant booking

Source: OpenTable, 1 Jun 2020.

FED IS WORKING VERY HARD BEHIND THE SCENESTotal of federal reserve banks, by asset type, US $trillion

Source: Federal Reserve, CBRE Research, May 2020.

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

US

$Tril

lions

Treasury Security Holdings Agency MBS Holdings Agency Debt Holdings

COVID-19 Impact

FISCAL STIMULUSFiscal stimulus packages in percent of GDP

Source: CBRE Research, Oxford Economics, May 2020.

0

5

10

15

20

25

Perc

ent o

f GD

P

More on the way?

0

2

4

6

8

10

12

14

16

1969

1972

1975

1978

1981

1984

1987

1990

1993

1996

1999

2002

2005

2008

2011

2014

2017

2020

(%) US Unemployment World GDP Growth

THE US REMAINS A KEY DRIVER OF GLOBAL GROWTHU.S. unemployment rate %, a common indicator of economic cycle

Source: Bureau of Labor Statistics, CBRE Research, May 2020.

3y 6y 4m 7y 8m 10y 6y 1m 10y 9m

A SURGE IN GLOBAL MONEY SUPPLY Money supply for USA, EU19, Japan and the UK (y-o-y growth)

Source: OECD, CBRE Research, April 2020.

0%

2%

4%

6%

8%

10%

12%

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Broad money (M3) Narrow money (M1)

WHAT ABOUT EMERGING MARKETS?

US, CHINA RECOVERY GOOD FOR LATAMBrazil & Mexico exports by destinations,12-month moving average

Source: Brazil Ministry of DIF, Mexican NIGS, CBRE Research, May 2020.

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

Shar

e of

Tot

al E

xpor

ts

Brazil

USA EU & UK China

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

Mexico

USA EU & UK China

EUROPE IS KEY FOR RUSSIA; INDIA NICELY DIVERSIFIEDIndia & Russia exports by destinations,12-month moving average

Source: Indian Ministry of Commerce & Industry, Russia Customs Service, CBRE Research, April 2020.

0%

10%

20%

30%

40%

50%

60%

70%

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

Shar

e of

Tot

al E

xpor

ts

India

USA EU & UK China & UK U.A.E.

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

Russia

USA EU & UK China

India

China

Brazil

100

1,000

10,000

100,000

1,000,000

0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95 100 105 110 115 120 125

Num

ber

of C

ases

…EVERY 2 DAYS

…EVERY 3 DAYS

…EVERY WEEK

Days Since 100 Cases

Russia

Mexico

CASES DOUBLE EVERY DAY

World

MANY EMS STILL STRUGGLING TO CONTAIN THE VIRUS Cumulative number of confirmed cases, by number of days since 100th case

Source: Financial Times, CBRE Research, European Centre for Disease Prevention, Macrobond, 2 Jun 2020.

Source: CBRE House-View, May 2020.

BUT WE EXPECT AN EMERGING MARKET RECOVERY IN Q4 2020GDP growth forecast by CBRE House-View

-26%

25%

-50%

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

60%

2019Q1

2019Q2

2019Q3

2019Q4

2020Q1

2020Q2

2020Q3

2020Q4

2021Q1

2021Q2

2021Q3

2021Q4

2022Q1

2022Q2

2022Q3

2022Q4

China India Brazil Mexico Russia

FISCAL SUPPORT IS NOT SO STRONGGeneral government debt as percent of GDP

Source: IMF Fiscal Monitor, CBRE Research, May 2020.

0

20

40

60

80

100

120

140

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

Brazil

India

China

Mexico

Russia

Advanced economies

Emerging Markets

Forecast

INTEREST RATE CUTS WILL HELPPolicy rate (%)

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

0

5

10

15

20

25

30

Turkey Brazil South Africa Mexico Russia India Saudi Arabia Indonesia Poland China

A Year Ago Now

EMERGING MARKETSHIGH RISK

OR MAJOR OPPORTUNITY

THE MACRO PLAY

FOREIGN INVESTMENT FALLS SHARPLY DURING RECESSIONS Total inbound capital flows to Brazil, Mexico, Russia, India, China

Source: CBRE Research, Q1 2020.

0

2

4

6

8

10

12

14

16

18

20

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Q1 2020

US$

Bill

ion

Mexico

Russia

Brazil

India

China

FOREIGN INVESTMENT FALLS SHARPLY DURING RECESSIONS Total inbound capital flows to Brazil, Mexico, Russia, India

Source: CBRE Research, Q1 2020.

0

1

2

3

4

5

6

7

8

9

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Q1 2020

US$

Bill

ion

Mexico

Russia

Brazil

India

AND CAPITAL DEPLOYMENT TO REBOUND, DESPITE A LAG Total inbound capital flows to Brazil, Mexico, Russia, India, China

Source: CBRE Research, Q1 2020.

0

2

4

6

8

10

12

14

16

18

20

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2018 2019 2020F 2021F 2022F

US$

Bill

ion

82% drop

55% recovery

Forecast

32% drop

EMERGING MARKET CURRENCIES APPRECIATE AGAINST US$? Forecast real exchange rates versus US$ index (2010=100)

Source: Oxford Economics, CBRE Research, Q2 2020.

40

60

80

100

120

140

160

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030

China

India

Russia

Mexico

Brazil

Per US$

7.13

75.60

70.64

22.13

5.43

CURRENCY TO GIVE US$ INVESTORS A BOOST IN RETURNS 5-year unlevered IRR (Internal Rate of Return) on prime office assets

Assumptions: The property is acquired at the end of 2020, rent declines by 10% and occupancy/rent collection falls by 20% in 2020.Source: CBRE Research, May 2020.

12%

23%

43%

-10%

0%

10%

20%

30%

40%

50%

Mexico City Mumbai São Paulo

Pre-COVID IRR Post-COVID Estimate Currency Gains

YIELD SPREAD WIDENED IN EMERGING MARKETS Emerging market bond yields over the U.S. 10-year treasury yield

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

0

1

2

3

4

5

6

7

8

Brazil China India Mexico Russia

(%) Pre-COVID March May

THE CYCLE PLAY

GLOBAL OFFICE RENT TRACKER

Source: CBRE Research, Q1 2020.

Explore prime office market data for major global markets.

RENTSAT PEAK

RENTALDECLINE

ACCELERATING

RENTALDECLINE

MODERATING

RENTALDECLINE

SLOWINGRENTS ATTROUGH

RENTALGROWTH

ACCELERATING

RENTALGROWTH

MODERATING

RENTALGROWTHSLOWING

RENTSAT PEAKPLATEAU

Rio de Janeiro

São Paulo Calgary | Mexico City

AucklandShanghai

Hong Kong SARSingapore

New York – DowntownNew York – Midtown

New York – Midtown-SouthTokyo

Chicago | Los AngelesParis | Sydney | Toronto

Mumbai | New Delhi

Frankfurt | London CityLondon West End

Madrid

Q1 2020 DATAAVAILABLE

www.cbre.com/renttracker

THE CHANGINGGLOBALIZATION PLAY

SOUTHEAST ASIA TO GAIN FROM U.S.-CHINA DECOUPLING Inbound foreign direct investment per capita (USD)

Source: Oxford Economics, Macrobond, CBRE Research, Q2 2020.

0

50

100

150

200

250

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

USD

per

Cap

ita

China Mexico Vietnam Cambodia Philippines

Upside potential for Mexico

INDIA: A LEADING GLOBAL OFFICE OUTSOURCING DESTINATION

Source: CBRE’s India mid-sized Corporate Sentiment Survey, IOOS 2019, CBRE Research, 2019.

• Over 250 mn. sq. ft. of office space leased during 2015-19, more than 60% from global occupiers across various tenant sectors.

• India has now moved up the ‘knowledge and skill’ curve.

OTHER TOP TIPS

• Core: Prime Office in São Paulo (Jardins, Faria Lima)– Robust demand, balanced vacancy

• Core: Logistics within 30 km of São Paulo – E-commerce growth

• Core plus: Offices in Marginal Pinheiros– Robust demand, low vacancy

• Opportunistic: Residential condos for sale / multi-family

BRAZIL

• Core: Domestically focused logistics– Mexico City, Guadalajara, Monterrey

• Opportunistic: Production and export focused industrial– Bajío, Tijuana, Ciudad Juarez

MEXICO

• Core – core plus: Leased up offices in Bangalore, Mumbai, Gurgaon and Hyderabad– Strong corporate / back-office demand; low vacancy; robust rent growth

• Core – core plus: Leased up warehouses in top 6 cities– Strong E-commerce & 3PL demand; growth potential; policy support

• Value add: Land parcels for build to suit offices in Bangalore and Hyderabad– Lack of ready-to-move-in space to lease; strong leasing demand

• Value add: Industrial assets, for essential products in top 6 cities– Manufacturing shift from China; growth potential

• Value add: Refurbished / repurposed facilities for last mile logistics in top 6 cities– Strong E-commerce demand; growth potential; policy support

• Opportunistic: Data centers in Mumbai and Chennai– Strong corporate demand; cloud computing growth; policy support; international cable landing stations

INDIA

• A wide V-shaped trajectory for GDP growth– Stabilization in Q3 and recovery in Q4– Strong growth in 2021– Developed economies lead, EMS follow– Major virus risks remain

• Real estate strategy in the EMs– Higher risk, need substantive expertise, but many opportunities– Macro opportunities– Cyclical opportunities– Geopolitical and structural opportunities

CONCLUSIONS

THANK YOU!PLEASE DON’T HESITATE TO CONTACT US.

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 aresubject 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 marketcircumstances. 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 viewsherein if its opinions, projections, analyses or market circumstances later change.Nothing in this presentation should be construed as an indicator of the future performance of CBRE’s securities or of the performance of any other company’s securities. You should not purchase or sell securities – of CBREor any other company – based on the views herein. CBRE disclaims all liability for securities purchased or sold based on information herein, and by viewing this presentation, you waive all claims against CBRE and thepresenter as well as against CBRE’s affiliates, officers, directors, employees, agents, advisers and representatives arising out of the accuracy, completeness, adequacy or your use of the information herein.© Copyright 2020 CBRE

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

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

Daniel ChangGlobal Research Analyst Economics & Capital Markets CBRE Research +1 617 912 5254daniel.chang@cbre.com