Office Leasing Won't Recover For Five Yrs: Cushman & Wakefield

office space in some major urban cities. To get a sense of kind of the future, here, uh, we welcome Rebecca Rocky, global head of forecasting for Cushman and Wakefield located in New York City. Rebecca, thanks so much for joining us. You know, I was in the city a couple of weeks ago, back in the office for day, and you know, I was, you know, kind of shocked to see the the fewer people on the street, and that suggested to me fewer people, uh in the office buildings.

Give us a sense of kind of where we are kind of in the global work worse in the office space, and how you guys are thinking about it. Sure well, first of all, thank you so much for having me today. UM. You know, clearly we have a number of things going on in the office sector, in particular, not the least of which is dealing with the damage that's been done

in the economy and the labor market. UM. As it relates to the return to the office, there are also a number of trends emerging and most offices are operating well below capacity right all over the country and really in most of the parts of the world. We're seeing that office utilization is below where it was and in some cases significantly. UM. And you know, fortunately office companies have been more resilient when you think about the damage

that's been done to different industries. Office employment has fared disproportionately better, and there is somewhat of a an ability to work remotely, to get through the times, to continue to work, just not in the office right now. So that's really what we're seeing take place, and are some of the things that we talk about in this report. Yeah, Rebecca, you did a global office impact study and found that office leasing will stay below pre COVID levels until twenty five, which,

when you think about it, sort of makes sense. What does that mean for the likes of Cashman and Wakefield and others like you. Well, I think it was a lot of opportunity to add value to our clients and helping them think about this new world that we're facing. Right. So, we believe that the office is a critical part of how companies do business, how they create value in particular, and so we fundamentally think there's intrinsic value to the

office place. Really, the question is what are the kinds of things we're doing in the office and how does behavior change from a leasing perspective as we go into

this new normal. Um. The fact that we're finding that despite some of the structural changes we anticipate, such as work from home to emerge, that the office sector does recover from a demand perspective, to me was a really strong finding and indicative of the fact that many companies view office as part of the broader ecosystem that will allow them to achieve the goals that they have as company.

But it's interesting, you know, we've we've heard a lot of corporate leaders in New York City calling for companies that bring their employers back, open up the city again. Yet it just seems like, you know, just the people I talked to, they say Okay, maybe I'll go back into the city, but it ain't gonna be five days a week. This work at home from thing works just fine. So is it going to be a sense that there

will be some permanent change. Absolutely absolutely. And you know, in the right now we're in what I call the adrenaline Russias COVID nineteen right, so we're dealing with competing forces of trying to figure out what's going on with schools and folks who need to maybe take care of their their parents. Right. A huge concern is I need to go take um groceries on the weekend and I don't want to be exposed and put purt risk. So

we have a lot of that going on. And this report really looked at different scenarios where we do find ourselves in a post COVID world, defined as a world where we have a medical solution such that we can really subside in terms of the level of fear of the virus. But to your point, we absolutely believe there will be long term changes and a majority of those are in the evolution of what we call agile working or part time at home, part time in third places,

and part time in the office. We we think a minority of the folks who work from home will ultimately be permanently there. Most people want to be in the office. Most people want to be in the office a few days a week. So it's really that evolution that we expect to be long lasting in nature, and which we tried to quantify in this report. Here are two statistics that really jumped out at me. Rebecca, US office vacancy is expected to rise steadily and peak at seventeen point

six percent. But get this by mid twenty two, so not even next year, but presumably well after we already have a vaccine. And you also found that asking rents are expected to decline by nine point three peak to twelve. First, that doesn't seem like that big of a decline if we're looking at nearly a fifth of office space going away until mid two. Are these in the major urban

centers and so on? Sure? Well, I think from the vacancy rate perspective, it's important to note that we were really at a low point for the cycle at just under thirteen percent, So the increase is really relative to that which was consistent with prior sort of peas of expansions in terms of the pre COVID level of vacancy. So we are expecting this shift upwards by about four

hundred fifty four HERD sixty basis points. And that's really that is the increase that is putting the downward pressure on rental rates um so that that effect is something that we expect to play out differently across cities. One of the things we do find is that, and this is consistent with history as well, suburban market the rents there be less elastic, they tend to move less during down cycles, and our our city central city rents do tend to move by a little bit more in our

findings were consistent with that as well. Rebecca, thank you. Presumably there'll be more studies like this and we will continue to keep in touch with you and here more. Rebecca Rocky is Global ahead of Forecasting for Kushman and Wakefield, joining us today. As we approach the elections, there's in the plomban discussion on the Wall Street don't what a possible Joe Biden presidency would mean for economic policy for financial markets. To get some answers to those questions, we

welcome Edmund Phelps. Edmund is a Nobel laureate and director of the Center on Capitalism in Society at Columbia University, Professor Phelps, Thanks so much for joining us. What do you What are your thoughts here? Should former Vice President Joe Biden win the election, Well, certainly hope you will win the election. I think the economy really depends on it. I've just been um very disturbed over over these past years to see uh Trump's attempts to to guide to

guide the economy, to intervene right and left. This creates enormous uncertainty. That's very bad for investment, and it's very bad for innovation. And innovation has already been suffering for quite a few decades. But with innovators won't get a chance to breathe. So I think I think it's very important that we vote out the Trump administration and give

a new group a chance. So that I first saw your article in The Guardian, the editorial and the Guardian and then later on a sort of a paper almost if you like, in Project to Syndicate, and you basically start off by excoriating President Trump's policy, you know, quote unquote economic policy, because, as you say, he practices Mussolini's doctrine of corporatism, the government as poppet master pulling the

strings of poppet companies. You also go on to talk about as populist rhetoric not translating into better pay for less advantage workers or victims of discrimination. And you have a whole sort of takedown of President's Trump's economic plans or actions. But why aren't we hearing more from Biden about what he would do? So, yes, we know that he's offering pell grounds to everybody and so on, but we're not getting a really developed economic platform as far

as I can see. Well, I think that Biden has h shown an interest in, um doing something about the wages at the bottom in this country, which have been a have continued to be a terrible problem for decades. I think I think he has shown interest in addressing the poor, core rewards going to to the least advantage in the country. And um, I think maybe your question is pointed to what do we hear from Biden about

investment and innovation? Well, I think I think he's I think he's shown some definitely shown some awareness of the need for picking up innovation. And of course, in the long term, you can't have sustained high investment if you don't have underlying innovation going on. So I think it's fair to say that Biden grown up in his his seventy something years. He's grown up in the economy, and

he understands what's going on. He understands the weakness of the economy, he understand slow growth, and uh, you know, there have been a hundred things that he's had to talk about, and maybe he's not not talked enough about investment innovation, but he has done some talking on economic justice, which is the other grand theme of mine. Yes, and I understand that, and I appreciate that you say that

he displays an awareness. But the month has been a politician his entire life, and surely he has ideas for what he would do to redirect funds in the economy, and not just on the corporate innovation side, but also, as you say, to translate you know, current politics in the situation into better pay for less advantage workers, victims, discrimination, erase economic justice injustices and so on. He's not coming out with any of that. Is he too scared that

that will alienate some of the demographics that he might need. Uh, I'm not a politician. I'm not even a political scientist. I really wouldn't venture. I wouldn't want to venture a guest on that at all. All right, So so Edmund, give us the thoughts just real quickly here. On trade, that's been a big issue for President Trump. How do you see a Biden prenency as it relates to economic trade? Oh? Well, I think it. The Trump's position towards trade has been

another contributor to um poor economic performance. Being able to trade with the rest of the world is awfully helpful in developing new products, in finding markets for new investment. It's hard to imagine high prosperity in the American economy without without very considerable amounts of international trade, foreign trade. And of course another thing is that Trump has gotten in the way of bringing in highly qualified people to

engage in uh innovation in the American economy. Silicon Valley is being starved of of the of of much of the talent that it needs. UM. I saw the other day that about trade and immigration, I saw that three thousand companies are now suing the White House over the tariffs that have been instituted by the Trump administration. So that just that just is an indication of how oppressive and how retarding uh Trump's influence has been on the economy. Well, professor,

thank you for that. We definitely hope to hear more from Joe Biden. Of course, the first debate is next Tuesday, and I imagine that there will be a portion on economic plans and for anybody who's interested in this, the economic case for Biden by Professor edmund S. Phelps, Nobel Laureate and of course from Columbia University as well, Legended Our Lifetimes really is both on Project Syndicate and in the Guardian and Paul, I think it's important. I think

we need some details. Were fewer than fourty days away from the selection, and both candidates need to step it up with the actual concrete proposals. Well, Vonnie, we are so fortunate to have on a regular basis of good folks of Johns Hopkins University come on and help us get a little bit smarter about this virus and potential therapy, potential vaccines. Today we're joined by Lauren Sauer at the Assistant Professor of Emergency Medicine at Johns Hopkins University. H Lauren,

thanks so much for joining us here. You know, the new story I guess I heard today is something called interfere on as a possible new treatment. To educate us on kind of what you think this might mean. Yeah, the two studies that came out recently on interfere on, we're really exciting to see. And I think, um, what I had seen, what I've seen briefly is that this may The scientists who did the studies feel that this may um account for nearly fifteen fourteen or fifteen percent

of the severe COVID cases. Um. What they're seeing is that this sort of lack of interfere on and the body is helping to facilitate severe disease. So people are getting sicker. Um. The good thing about it is that we have used interference, especially synthetic interference, for a long time for other diseases, and so UM, if we can target these at risk patients and use some of this research to identify them early, um, we may be able to treat them quickly with therapies that we already have

in our tool kit for other diseases. And it's particularly amazing if it ends up being all true and the research proves itself out, because it's the type of thing that hits young people. And also it means that it might save you from going on respirator, which we all know. Then you know, it is a whole other stage in this illness. When might we know something about the effectiveness of of an interfere on you know, rehabilitation scheme if

you like. Yeah, so, and the studies that came out are already telling us that interfe treatment may be an effective option. UM. The new arm of the NIH Adaptive Trial Act is also an interfere on study. And I would imagine that there's lots of interfere on UM studies across the country and possibly across the globe. UM, there's I'm just too doing interfere on specific studies, especially when you're thinking these studies may target or only enroll people

with severe disease. UM. We are seeing more outpatients with COVID and peer severe disease at least where I am UM, and so focusing on enrolling those patients into the clinical trials quickly and efficiently, both to hopefully save lives but also to really better understand the mechanism is critical right now. So, Lauren, it appears the data remains stupornly high in terms of new cases. UM, yet perhaps the death rate is declining. Is that kind of your understanding some of the data

we're starting to see more recently. Yeah. I think one of the things we're seeing is that, UM, we're we are getting patients out of the hospital quicker, which is great, UM, and that may be I think we're gonna need a lot of long term studies to understand why that's happening. But a big piece of it maybe that we're getting better at managing these patients because we're learning more about

the course of illness and the course of disease. So UM, we're keeping people from entering into that severe disease state, you know, off of ventilator, UM, off of those high flow oxygen needs, because we're managing their earlier or or we're identifying them earlier and we're managing them better in

the hospital and getting them not quicker. So, Lauren, we were talking yesterday about people in the UK proactively getting injected or or infected with coronavirus in order to try and help studies these people, I mean, are they risking long term consequences? I think they absolutely are. The challenge study model that UM talking about that we're seeing in

the UK. UM is a model that we've used in other diseases to better understand UM how vaccines work, so that it's a controlled environment and we understand the exposure, We understand the course of the disease and exactly where in the disease process of patients or the participants get the vaccine UM and what their exposure level is after

getting the vaccine. The hard part in this situation is that we don't have a really good therapeutic toolkit, so if something goes wrong with these patients UM, we don't have a great a series of great options to treat them, so that that is a higher risk than than you

would want in a challenge study. And there's a lot of ongoing community transmission in many places across the globe, so there are opportunities to do vaccine trials the right way in a well controlled environment, understanding community transmission without putting people deliberately at risk and exposing them to to the coronavirus. So it's a risk that we're taking unnecessarily. So Lauren, again I'm just going to ask us to

try to triangulate around timing. Is it still fair to suspect that we will that some series of vaccines will be available sometime early next year, maybe late this year, but it will take time after that to kind of figure out what's most effective. Is that's still the way to think about it. Yeah, I think that early next year is probably on target for a few of these vaccines. UM. We're seeing the Phase three trials happen right now, We're seeing good data come in. I think the challenges that

scale up piece so UM. Once a vaccine can it goes through the process, we still have the regulatory environment for getting that approval from the FDA. For example. UM. There is discussion of you of using the Emergency used authorization in the interim space between UM or preliminary data from the Phase three trials and getting approval from the

UM for the vaccine to roll out more broadly. But we also have to consider scale up of manufacturing, distribution plans, prioritizing the people who will receive it, what are the most important populations UM, And so there's a lot of things that have to happen between now and a massive rollout of the vaccine trial. And I think mid to late and mid to the end of next year is

probably reasonable for large scale rollout. Lawrence, thank you as always absolutely love getting your updates straight from you know, the epicenter of where all the research is happening. Lawrence Hower is the system Professor of Emergency Medicine at Johns Hopkins School of Medicine and of course the Bloomberg School of Public Health. Is supported by MICHAELAR Bloomberg, founder of

Bloomberg LP and Bloomberg Philanthropies and Bloomberg Markets. Is brought team by with him forward thinking advisory and accounting firm helping hiens to be in a position of strength and the new reality of business learn about their innovative solutions by visiting with them dot com. So it's time to talk commodities. Some are seeing good news, some are not seeing so much good news. Let's bring in Mike McGlone, who knows all about the precious metals and also precious

metals and every other commodity out there. He's commodity strategist for Bloomberg Intelligence. Mike, we haven't talked too much about China recently, mainly because apart from TikTok and ouricle and so on, there haven't been many trade developments. But at the same time, underlying commodities are moving still because of this. For example, China went on a buying spree and so that seems to have revived export profits for some top crop traders. So that's good news, right, Are we seeing

prices reflect that? Oh? Certainly in soybeans tiganium, Yes, so I means that ten dollars a bush, so they're up about five percent in the year they got about ten thirty. That's been a good sign. It's almost completely on exports because it's a big crop this year, not really swabeans, but corn, so that's a big deal. And also the market's anticipating the potential peak in the dollar, and the US now exports about swabeans, so the value of the dollar, the value of the Brazilian real is a big thing.

Just the fact that the China has been back in has been good in crops, it's really better take taking them off the bottom. But for new highs to really go up for more strength, eggs need a peak dollar, all right. So but also look at the dollar index here at ninety four. That's not peaked. Dollar isn't no hit all um, And it's really and from from the egg standpoint, we watched the trade weighted broad dollar because the dollar index is six almost two thirds Euro trade

weighted broad is mostly China's China. It doesn't take every day, but gives you a good indication. The key thing is what's been really driving that strong dollar the last ten years ago, so is the out performance the US stock market. So we're seeing lately is a bit of a divergence. There's been flows into commanities. Commanies are outperforming during this last little sloon correction in the stock markets. The key is Greggs and Eggs aren't really going to really matter

to the stock market so much. But in copper, that's been a key thing I've been watching. Copper is the highest correlation to the stock market ever in a fifty two weeks twelve one basis and it's really not and it's still hanging around three dollars a pound versus the ten percent correction in nansect. That's a good sign that

maybe we're seeing some divergence. I think people are looking more for the physical assets, not just gold, silver, platinum plate, and not just sup precious but more the base metals like copper. Well, I was going to say, with the exception actually of gold, which seems to really have just gone and got its cold and left the room, right Mike. In the short term, gold still up in the year. In the unchanged Bitcoin is up in there. So my bias at the beginning here was the quasi currencies gold

and bitcoin should continue to outperform. I don't see why I should change that. The gold just got a little bit extended. You know, it was fifty it was well above is fifty two eight me and the highest and a long time. It's it's it's consolidating the bull market that way I see it. Right now. It's going to back up in the good sport around eighteen hundred dollars

and ounced. But if you look at the foundation for gold rapidly rise in US debt to the GDP and increase in CHEWI on a global SCS scale, it's unprecedented goal has a very solid foundation for the next five ten years. And just help us revisit the bull case for bitcoin. We can talk bitcoin. Vannie doesn't have a no bitcoin policy like Tom peen Um. So give us that bull case for bitcoin again, Mike. Bottom line very

and supply actually less potentially less supply than gold. Higher prices will not bring on more supply, and then it's about demand. So all my indications for demand are higher, and bitcoin has been becoming adopted in the space. There's more and more people getting in there. The main indications are quite positive. Futures open, interest um, exchange traded products coming on for and and addresses used and things like that.

So bitcoins is getting there. The cool thing about bitcoins has had a significant correction and it's had a period of disdain, and so that's us you a good foundation for higher prices. And the correlation between bitcoin and gold is the highest ever depending on how you measure it. So I see bitcoin is becoming a digital version of gold. It's just more of a kind of a baby and

it's catching up. It's taking baby steps now at the moment. Well, I on that note, would like to compare Etherium with bitcoin, and so if you look at returns over the last year, ethereum is up on Bitcoin, up versus the US dollar. Does that just suggest that bitcoin is a little more mature as a cryptocurrency. It is, and there's a big difference.

Ethereum kind of part of the whole other crypto space, and there's seven thousand of them Ethereum is the number two cryptocurrency, but if you look at the current trends, a theorem will be surpassed next year by the stable coin tether. So ethereum has got good and things that has going for it is defied decentralized finances finance, and the dex is decentralized exchanges. Theorems like the first platform for that, but it has a lot of competition. Theorium

got a little bit expensive around five hundred. It's meeting good support around three hundred. But I think their overall bias is towards and continued to increase. But Bitcoin should continue to outperform the overall broad market. And the problem is there's just too much supply in the broad crypto market. So Mike, we can't let you go without talking the soft commodities, agricultural. Do we have evidence? I mean, is this market now just completely driven by China on? China off?

Is that kind of the only thing we need to focus on. It's right now, it is China has really helped bring it out of the dull drums, and we had multi year lows, lows and corns just a few months ago, and soybeans are getting pretty beat up. Yet we have a you know, have a pretty good crop. But this year, actually the revisions for the U s productions actually come down since that August report, so it's

a good sign it's going that way. But I don't see US sauce i e. Corn soy means really having a good bullmark until the dollar peaks, because the US now exports more than of its soy it means and over its wheat. So the dollar really matters there. Well, I mean just on the US. You know, how can the dollar peak again or even get much stronger when the Chinese have the yuan trading around you know, six eight at this point and looking to go even lower

i e. Stronger. Well, so the the un has actually been strengthening recently because it's six eight used to be seven recently. But the key thing you remember from the dollar standpoint is the dollars measured against other other other currencies, which are all paper currencies, and that's where you come to the physical assets like most notably the medals, the gold, the bitcoins of the world. They're rising versus all paper currencies.

So it's that race for cheaper currencies. Everybody's queueing everybody's at zero rates, which means physical assets like copper and gold and bitcoin are gaining that value. And that's what I see going forward, and hopefully that'll trickle down to the other commodities. It's just probably not going to trickle up to crude oil because there's too much supply and we all know the trend in decarbonization. Really quick, I'm gonna slip in a discussion about cattle. What's going on?

How's the herd look? Yes, sorry, that's one thing I don't watch much of cattle, Paul, I'm sorry about that one. Just the one thing I've never been able to figure out is a good high robust correlations to the price of cattle. Alright, I see it's possible to stump Mike mcgloan, Michael don't. Thanks so much for joining US commodity strategists for Bloomberg Intelligences all over the commodity complex. For ut Vonnie, it's great to have my gun. Cattle features don't seem

to be shifting around much Pole. Of course I looked it up. It's LC one. If you want the genericat I'm sure every farmer out there would say that no cattle is generic they're all individual. Thanks for listening to Bloomberg Markets podcast asked. You can subscribe and listen to interviews at Apple Podcasts or whatever podcast platform you prefer. I'm Bonnie Quinn, I'm on Twitter at Bonnie Quinn. And

I'm Paul Sweeney. I'm on Twitter at pt Sweeney. Before the podcast, you can always catch us worldwide at Bloomberg Radio