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Which cities will best weather the pandemic?
As volatility climbs across global financial markets, investors are wondering where to find opportunities. Real estate is no exception. Nuveen Real Estate’s research team created a model to forecast U.S. real estate performance across the 50 largest cities in the country, and the results may surprise you. As selective investors, we know that even in the midst of a crisis, research and experience can uncover opportunities for growth and income.
Markets with large exposure to newer non-cyclical industries such as information technology (San Jose), life science (Boston) and defense (Washington, D.C.) are best - positioned for resilience. Markets with large exposure to cyclical industries such as tourism (New Orleans), hospitality (Las Vegas), energy (Oklahoma City) and retail (Miami) may face continued challenges.
What did we measure?
For each city, we considered these factors:
- Employment in industries most- and least-negatively affected by the pandemic
- Indicators of coronavirus severity, such as mortality rate, unemployment claims and population at risk
- Projections of economic and fiscal health
- Exposure to fossil fuel industry employment and generation/production
- Proportion of revenue from “elastic” sources of income
- Proportion of the workforce employed by small businesses
- Projected unemployment rate and gross metropolitan product growth rates
- Proportion of non-current commercial loans
- Change in consumer spending year - over - year, or data measuring mobility
Real estate is just one facet when it comes to which cities might fare best from here
Many factors need to be considered, such as how severe the next wave of the pandemic could be. It is important to recognize that our analysis does not take into account all those that could be considered when evaluating the economic impact of the coronavirus pandemic. Additionally, significant variations in outlook could occur. Finally, the impact on specific property types in a given city can vary significantly from the city’s economy as a whole, as sector performance is also driven by supply, demand and valuation. However, this framework provides real estate investors with insight into the dramatic diversity of opportunity and challenge at play in the market today.
In this issue
The views and opinions expressed are for informational and educational purposes only as of the date of production/writing and may change without notice at any time based on numerous factors, such as market or other conditions, legal and regulatory developments, additional risks and uncertainties and may not come to pass. This material may contain “forward-looking” information that is not purely historical in nature.
Such information may include, among other things, projections, forecasts, estimates of market returns, and proposed or expected portfolio composition. Any changes to assumptions that may have been made in preparing this material could have a material impact on the information presented herein by way of example. Past performance is no guarantee of future results. Investing involves risk; principal loss is possible.
All information has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. There is no representation or warranty as to the current accuracy, reliability or completeness of, nor liability for, decisions based on such information and it should not be relied on as such.
A word on risk
Real estate investments are subject to various risks, including fluctuations in property values, higher expenses or lower income than expected, and potential environmental problems and liability. Please consider all risks carefully prior to investing in any particular strategy. A portfolio’s concentration in the real estate sector makes it subject to greater risk and volatility than other portfolios that are more diversified and its value may be substantially affected by economic events in the real estate industry. International investing involves risks, including risks related to foreign currency, limited liquidity particularly where the underlying asset comprises real estate, less government regulation in some jurisdictions, and the possibility of substantial volatility due to adverse political, economic or other developments.
Nuveen provides investment advisory services through its investment specialists.
This information does not constitute investment research as defined under MiFID.