Perspective U.S. - Mid-Year 2021

• The U.S. is positioned for a second half expansion. GDP has recovered and major indicators are in expansionary territory. Healthy consumer balance sheets and pentup demand to spend will propel the economy forward.
• COVID-19 remains a downside risk as the Delta variant spreads. Evidence to date suggests that vaccines are effective in preventing severe illness and death from this variant. Vaccination rates are slowing nationally and there are large differences in rates across the country.
• Jobs are rebounding slowly as many workers remain on the sidelines. Enhanced unemployment benefits,  eographic and skill mismatches, retirement, low immigration, and other factors are leading to a significant
  rise in job openings.
• Aggressive fiscal stimulus has helped the economy get back on track. Momentum on a bipartisan infrastructure bill is a positive sign that the expansion could get an additional boost with tangible long-term benefits for the economy.
• The Fed is content to let the economy run hot in the near term. Interest rates remain low, but investors are jittery. Inflation data and the Delta variant are creating turbulence in the equity and bond markets. Inflation expectations seem to be moderating, but wage-driven pressure will be significant.
• Housing demand is robust, even in gateway markets. Limited supply and high prices in the for-sale market are helping to fuel demand for both apartments and singlefamily rentals.
• Office demand continues to fall, albeit at a slower rate. Mobility data show workers have yet to return in large numbers and the Delta variant is causing some employers to delay their plans to have employees return.
• The reopening will not reverse the surge in ecommerce that unfolded during the pandemic. Store-based retail should gain some traction in the near term and retail asset values are stabilizing. But we see industrial continuing its recent run of outperformance relative to other property sectors.
• Economic and capital market conditions will support healthy property fundamentals and investment performance. The setup is attractive for the asset class in the second half of 2021, although the pandemic lingers as a potentially disruptive force.

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