Moody's Corporation · NYSE:MCO
Moody's — Q4 2020 Earnings Presentation
29 slides from Moody's's earnings presentation, Feb 11, 2021
Slide 1: Quarterly Economic Briefing Q4 2020
Quarterly Economic Briefing Q4 2020 Victor Calanog, PhD | Head of CRE Economics February 11, 2021
Slide 2: Agenda
Agenda 1. How has the evolving policy environment shifted our economic outlook (this year, and the near term)? 2. Discussion of how drivers of income fundamentals like rents and vacancies fared in the fourth quarter and 2020 as a whole. 3. A significant (positive) shift in our outlook on the transac
Slide 3: A Tumultuous Year – With Some End in Sight
1 A Tumultuous Year – With Some End in Sight
Slide 4: Quarterly GDP Growth & Components
Quarterly GDP Growth & Components 40 40 33.433.1 30 30 GDP 20 20 10 10 5.1 4.9 5.1 2.92.9 2.6 2.6 4.9 3.33.3 4 Percentage 3.2 3.2 1.7 1.7 0.5 0.5 0.5 0.5 3.6 3.6 0.5 0.5 3.2 3.2 3.2 3.2 1.93.3 1.9 3.31.3 0.12.0 1.30.1 1.92.22.22.52.52.32.3 2.01.9 3.93.9 1.71.72.92.9 3.83.8 2.72.7 1.31.3 1.5 1.5 2.12
Slide 5: Updated GDP Forecasts & Scenarios
Updated GDP Forecasts & Scenarios Real GDP, annualized quarter/quarter growth rate 40.0% 30.0% 20.0% 10.0% 0.0% -10.0% -20.0% -30.0% -40.0% 2018Q4 2019Q4 2020Q4 2021Q4 2022Q4 Baseline Recession Protracted Slump Sources: BEA; Moody’s Analytics Quarterly Economic Briefing | February 11, 2021 5
Slide 6: Wage Growth and Unemployment
The Labor Markets Through February 2021 Job Creation and the Unemployment Rate 5000 18.0% Change Employment 2021 Unemployment Rate Yearly Wage Growth NAIRU 0 15.0% Wage Growth and Unemployment -5000 12.0% Payrolls (Thousands) -10000 9.0% -15000 6.0% -20000 3.0% -25000 0.0% Jan Jan Jan Jan Jan Jan Ja
Slide 7: The Economic Outlook & Policy Environment
The Economic Outlook & Policy Environment Key Takeaways » Baseline forecasts of 5% real GDP growth for 2021 and 2022 are a (significant) net positive for our change in outlook. » <What does this mean for CRE performance metrics?> » Solid (positive) shift in sentiment for CRE industry participants. »
Slide 8: National Market Updates
2 National Market Updates
Slide 9: National Apartment Market
National Apartment Market Quarterly & Annual Market Conditions Asking Percent Effective Percent Vacancy Asking Percent Effective Percent Vacancy Year Qtr Year Rent Change Rent Change Rate Rent Change Rent Change Rate 2013 4 $1,146 0.9% $1,100 1.0% 4.4% 2011 $1,070 2.4% $1,019 2.7% 5.3% » Vacancy rat
Slide 10: National Apartment Market Supply & Demand Trends
National Apartment Market Supply & Demand Trends 400 9% Forecast 350 8% 300 7% 250 6% Units (In Thousands) Vacancy Rate 200 5% 150 4% 100 3% 50 2% 0 1% -50 0% 1985 1989 1993 1997 2001 2005 2009 2013 2017 2021 2025 Source: Moody’s Analytics REIS; Top 50 Primary Apartment Markets Completions Net Absor
Slide 11: National Office Market
National Office Market Quarterly & Annual Market Conditions Net Asking Percent Effective Percent Vacancy Net Asking Percent Effective Percent Vacancy Year Qtr Year Absorption Rent Change Rent Change Rate Absorption Rent Change Rent Change Rate » Office vacancies rose by 2013 4 6.4 $29.32 0.7% $23.69
Slide 12: National Office Market Supply & Demand Trends
National Office Market Supply & Demand Trends 200 28% Forecast » Office vacancies expected to approach record highs in late 2021 or 150 24% 2022, depending on the geographic market. 100 20% Square Feet (In Millions) » As some offices reopen, future 50 16% Vacancy Rate demand for office space remains
Slide 13: National Retail Market
National Retail Market Quarterly & Annual Market Conditions Neighborhood & Community Neighborhood & Community Net Asking Percent Effective Percent Vacancy Net Asking Percent Effective Percent Vacancy Year Qtr Year Absorption Rent Change Rent Change Rate Absorption Rent Change Rent Change Rate 2013 4
Slide 14: National Retail Market Supply & Demand Trends
National Retail Market Supply & Demand Trends » Retail vacancies expected to break 80 14% Forecast historic highs – up to 12.7% by 2021, and remain elevated through 2022 before declining somewhat. 60 12% » Rent forecasts are expected to be almost double the magnitude of 40 10% Square Feet (in Millio
Slide 15: Industrial: Holding Steady in the Fourth Quarter
Industrial: Holding Steady in the Fourth Quarter 1.2% 13% Effective Rent Growth Vacancy Rate 1.0% 12% » Flex/R&D vacancies down by Flex/R&D 0.8% 11% Effective Rent Growth 10 basis points in the fourth Vacancy Rate 0.6% 10% quarter to 10.2%. 0.4% 9% » Effective rents rose by 0.5% in 0.2% 8% the fourt
Slide 16: National Hotel Market
National Hotel Market Quarterly Market Conditions Percent Occupancy Percent Percent Year Qtr ADR RevPAR Change Rate Change Change ➢ Outsized effect of pandemic on hotel 2016 1 $120 0.8% 64.3% -0.5% $77 0.1% performance metrics – unsurprising, 2016 2 $120 0.0% 65.0% 0.7% $78 1.1% 2016 3 $122 1.7% 65.
Slide 17: Specialty Sector Updates
3 Specialty Sector Updates
Slide 18: Self Storage in the Fourth Quarter
Self Storage in the Fourth Quarter » Occupancies essentially National Occupancy Rates (50 Metropolitan Areas) 89% remained stable and flat throughout 2020, 88% notwithstanding seasonality: 87% we are at 85.5% at the fourth 86% quarter of 2020 – the same 85% level relative to the fourth quarter of 20
Slide 19: Student Housing in the Fourth Quarter
Student Housing in the Fourth Quarter Regional Rent Growth, Fall 2020 – Fall 2021 » Tables present Fall 2020 to Fall 2021 forecasted changes in vacancies and West rents across subtypes. Southwest » Given continuing uncertainty about how higher education as a service is Midwest to be delivered, expec
Slide 20: Senior Housing in the Fourth Quarter
Senior Housing in the Fourth Quarter Aggregate Vacancy Rate Subsector Rent Growth Rates 18.0% 2.0% Independent Living 1.8% Assisted Living 16.0% Memory Care 1.6% Skilled Nursing 1.4% 14.0% 1.2% 12.0% 1.0% 0.8% 10.0% 0.6% 0.4% 8.0% 0.2% 6.0% 0.0% 2018Q4 2019Q2 2019Q4 2020Q2 2020Q4 2018Q4 2019Q2 2019Q
Slide 21: LIHTC in the Fourth Quarter
LIHTC in the Fourth Quarter » Vacancies ended 2020 at a very Top Five Affordable Housing Markets by 2020Q4 Rent Growth 3.5% 9% tight 2.6% - and all this despite 3.0% inventory growing by a relatively 8% robust 2.5% for the year. 2.5% 7% » National level asking rents rose 2.0% 6% by 1.8% for the year
Slide 22: CRE Capital Markets
4 CRE Capital Markets
Slide 23: Transaction Activity Throughout 2020
Transaction Activity Throughout 2020 Compare and contrast this with 2008-2009 $140 Transaction Volume (In $Billions) $120 $100 $80 $60 $40 $20 $- 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Apartment Office Retail Industrial Hotel Source: Moody’s Analytics REIS Quarterly Ec
Slide 24: Cap Rate Forecasts
Cap Rate Forecasts Implied Peak-to-Trough Declines Significantly Lower 14% Apartment Office Retail Industrial Hotel » Cap rate increases are still forecasted for 2021 through 12% 2022, but at a trajectory much less steeper than before. Price 10% declines are therefore expected to be much less severe
Slide 25: Questions from Participants and Closing Remarks
5 Questions from Participants and Closing Remarks
Slide 26: Questions from Participants
Questions from Participants » “You didn’t change much of what you were projecting for income drivers like rents and vacancies given predicted distress and long-term change – but you’ve revised your price decline forecasts towards a significantly more positive outlook. Why the divergence?” » “Earlier
Slide 27: Summary & Parting Thoughts
Summary & Parting Thoughts » Fourth quarter GDP figures and job market signals suggest the need for continued fiscal and monetary support – which appears to be forthcoming. » 2020 was a tough year: record declines in rents posted for some property types; vacancies rising at a relatively fast clip fo
Slide 28: moodysanalytics.com
General Questions Sales Information Customer Success [email protected] [email protected] [email protected] (800) 366-7347 (646) 346-5400 (212) 901-1932 moodysanalytics.com
Slide 29: Quarterly Economic Briefing | February 11, 2021
© 2021 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All To the extent permitted by law, MOODY’S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liabilit