This recession is divergent from past downturns, both in itsonset—a pandemic that triggered a global economic shutdown—and itstrends and patterns, which are still emerging. During a digitalconversation last week hosted by George SmithPartners, panelists—Bethany Logan Ropa ofUBS Investment Bank; Tim Sullivanof Meyers Research; and WesRogers of Landmark Properties—discussedwhat has been most surprising as the market shifted in the last fewmonths.

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Sullivan noted that the trends have widely varied based on themarket and the severity of the COVID-19 outbreak, meaning that theimpact in New York City looked much different than in Austin,Texas. Jobs were also lost at a much faster rate than in pastrecessions. "We lost more jobs quicker than any other downturn thanin the history of the US. We are hoping that it is going to comeback quickly," he said. Sullivan also was surprised to see quickspending action and a relatively unaffected home building industry."The power of fiscal support from the government has been amazing,"he said. "Don't discount it, and has probably been the thing thathas kept both sides together. The resiliency of the new home markethas been remarkable. Some builders are trading at stock pricesabove where they were before COVID."

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Rogers and Ropa were both surprised at the resiliency in certainaspects of the market. For Rogers, the firm's student housingportfolio has outperformed expectations. "When this crisis started,we identified some important risk areas and went into a contingencyplan there," he said. "The first thing was the impact touniversities, which pretty immediately went into online classes. Wehave about 40,000 students, and we were really concerned aboutwhether or not they were going to continue to pay rent and if theywould continue to pre-lease for the fall."

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However, student housing rent remained stable. Through April,the firm had more than 97% collections and only saw a quarter ofstudents vacate units. Preleasing activity has also surpassedexpectations. Prior to the onset of the pandemic, LandmarkProperties was ahead of schedule on preleasing activity compared tolast year, and the losses in the first months of the pandemic didnot offset those gains. "Leasing velocity slowed for the first twomonths and narrowed the gap, but in the last couple of weeks, wehave seen velocity pick up even relative to this time last year,"said Rogers. "We are almost 85% preleases in our portfolio, whichis about 1.5% better than where we were this time last year.Students seem to be pretty confident that universities are going toopen and they are going to come back to their classes."

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For Ropa, REIT stability has been the most surprising change inthis downward shift, especially compared to the 2008 financialcrisis. "There were a lot of lessons learned by the public REITs tomake sure that they can manage their debt maturities and whathappens if the capital markets shut down and they can't refinancedebt or issue equity," she said. "In the last decade, there hasbeen a lot of planning and really optimizing balance sheets to makesure that in any given year, there was no significant debt maturitytower, no development pipeline where they couldn't handle the spendand a dividend that was well covered by free cash flow."

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As a result, the REITs were prepared for another economicdisaster, like this, and are much more capable of weathering thisstorm. "Coming into this crisis, you saw the REITs betterpositioned than they were in 2008," she Ropa. "They have beenplanning a decade for this."

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Kelsi Maree Borland

Kelsi Maree Borland is a freelance journalist and magazine writer based in Los Angeles, California. For more than 5 years, she has extensively reported on the commercial real estate industry, covering major deals across all commercial asset classes, investment strategy and capital markets trends, market commentary, economic trends and new technologies disrupting and revolutionizing the industry. Her work appears daily on GlobeSt.com and regularly in Real Estate Forum Magazine. As a magazine writer, she covers lifestyle and travel trends. Her work has appeared in Angeleno, Los Angeles Magazine, Travel and Leisure and more.