Nearly 40 real estate economists and analysts feel the COVID-19 recession will impact real estate markets and values less severely than the 2008 financial crisis—except for retail and hotel real estate.

The economists predicted there will be a $275 billion decrease in real estate transaction volumes in 2020, according to a survey in May by the Urban Land Institute. But they expected transaction volumes to rise over the next two years, which would create a healthier capital market compared to the 2008 Great Recession.

“Real estate economists expect that while the top-line economic impact of COVID-19 will be much worse than the global financial crisis, US real estate market fundamentals and values will fare much better,” said William Maher, a leading member of the Urban Land Institute, in prepared remarks. “Only retail and hotel are expected to suffer a worse outcome.”

The institute’s semi-annual survey covered the time period of 2020 through 2022. The organization reported its findings in the latest Real Estate Economic Forecast. The respondents came from 35 leading real estate organizations.

Price Drop

The price value of commercial real estate, the economists projected, would fall by 7% this year. It’s much better than the 13.6% drop in 2008 and the 20.8% drop in 2009. Respondents expected for more debt financing to be available when compared to 2008′s financial crisis.

The survey talked about rent growth expectations: respondents expected a 2% decrease in apartment growth in 2020. Over a three-year period, hotel properties would decrease by 5.3% revenue per room. Retail properties would drop by 3.1% and office buildings would see a 1% decline, said the survey.

The vacancy rate of retail space would rise to 11.6% in 2020, keep rising in 2021, and level-off in 2022, said the respondents. Hotels will fare worse: occupancy rates are expected to plummet to 40.1% this year.

“Apartment and office vacancy rates will see modest deterioration in 2020 before seeing falling vacancy rates by 2022,” the survey said.

Returns on real estate investment trusts would fall by 18% this year, the economists predicted, but they would grow by 10% in both 2021 and 2022.

They felt that starts on single-family construction would drop to 650,000 this year, which is negative 27% compared to 2019. The price of homes, they said, would average 1.1% in 2020, but it would improve to 4.6% in 2022.

Maher, the institute’s leading member, said that real estate professionals should feel some relief because of the economists’ relatively positive view of the future. But that relief comes with a caveat.

He said, “The severity of the current economic downturn and the many unknowns of a global pandemic should temper our views and expectations.”