Industrial & LogisticsStrength and Resilience Amid Global Recession?

Wednesday, September 09th - 10:00 - 11:00 Brasilia Time (GMT-3)

THE AMAZON EFFECT & GLOBAL INDUSTRIAL REAL ESTATE

SEPTEMBER 2020

DR. RICHARD BARKHAMGlobal Chief Economist & Head of Americas Research CBRE Research

HOW IS THE RECOVERY GOING?

China

France

Spain

Japan

Mexico

U.S. excl. NY (rhs)

Brazil (rhs)

0

10.000

20.000

30.000

40.000

50.000

60.000

70.000

80.000

0

2.000

4.000

6.000

8.000

10.000

0 10 20 30 40 50 60 70 80 90 100 110 120 130 140 150 160 170 180 190

Num

ber

of C

ases

COVID-19 STILL HARD TO CONTROLDaily new cases in 7-day moving averages

Source: CBRE Research, European Centre for Disease Prevention, COVID Tracking Project, Macrobond, 8 Sep 2020.Note: Number reported as a 7-day moving average.

Days Since Daily Increase Exceeds 100

BUT A COVID-19 VACCINE IS COMING SOON

Source: U.S. Census Bureau, CBRE Research, July 2020.

IN THE U.S. RETAIL SALES ARE BACK TO PRE-COVID LEVELU.S. retail and food services sales (excl. auto and gas)

300

310

320

330

340

350

360

370

380

390

400

Jan-2

0

Feb-2

0

Mar

-20

Apr-20

May

-20

Jun-2

0Ju

l-20

US$

Bill

ions

BUSINESS CONFIDENCE UP SHARPLY AROUND THE WORLDGlobal market business confidence index

20

25

30

35

40

45

50

55

60

Aug-17 Mar-18 Oct-18 May-19 Dec-19 Jul-20

Inde

x>50

= Ex

pans

ion

Global

Composite

Manufacturing

Services

20

25

30

35

40

45

50

55

60

Aug-17 Feb-18 Aug-18 Feb-19 Aug-19 Feb-20 Aug-20

U.S.

Composite

Manufacturing

Services

Source: Markit Business Survey, Macrobond, CBRE Research, August 2020.

CHINA BOUNCING BACK AS WELLCurrent Economic Activity Indicator

Source: CBRE Research, September 2020.

Q3 forecast = …

-4

-3

-2

-1

1

2

-10

-5

0

5

10

15

20

Sep-0

5

Sep-0

6

Sep-0

7

Sep-0

8

Sep-0

9

Sep-1

0

Sep-1

1

Sep-1

2

Sep-1

3

Sep-1

4

Sep-1

5

Sep-1

6

Sep-1

7

Sep-1

8

Sep-1

9

Sep-2

0

Econ

omic

Act

ivity

Indi

cato

r

Real

GD

P G

row

th (

Y-o-

Y, %

)

Real GDP Growth (lhs)

PUBLIC TRANSIT LAGGING IN CHINA, CAR SALES UPCar sales fully recovered and growing

Source: Civil Aviation Administration of China, China Railway, China Passenger Car Association, CBRE Research, August 2020.

0

20

40

60

80

100

120

140

160

May

-19

Jun-1

9Ju

l-19

Aug-19

Sep-1

9

Oct-19

Nov-19

Dec-19

Jan-2

0

Feb-2

0

Mar

-20

Apr-20

May

-20

Jun-2

0Ju

l-20

Inde

x (M

ay 2

019=

100)

Air passengers Rail passengers Car Sales

STOCK MARKETS ARE LOOKING TOWARDS RECOVERYEquity market indexes (1/1/2020 = 100)

Source: S&P, FTSE, Deutsche Boerse, Nikkei, Shanghai Stock Exchange, Macrobond, CBRE Research, 8 Sep 2020.

60

70

80

90

100

110

120

1/1 1/9 1/171/2

52/2 2/1

02/1

82/2

63/5 3/1

33/2

13/2

94/6 4/1

44/2

24/3

05/8 5/1

65/2

46/1 6/9 6/1

76/2

57/3 7/1

17/1

97/2

78/4 8/1

28/2

08/2

89/5

Inde

x

S&P 500 FTSE 100 Nikkei 225 Shanghai SE DAX 30

COVID-19 HAD A BIG NEGATIVE IN 20202020 annual GDP growth forecast (September)

Source: CBRE House-View, September 2020.

-4,8-5,6

-6,5 -6,9

-9,4-10,1 -10,3

2,3

-4,6

-7,7

-12

-10

-8

-6

-4

-2

0

2

4

USA Japan Germany Canada Italy UK France China Brazil Mexico

Real

GD

P G

row

th (

%)

THE REBOUND HAS BEGUN AND WILL CONTINUE IN 20212021 annual GDP growth forecast (September)

Source: CBRE House-View, September 2020.

4,8

2,6

5,4

8,9

7,1

5,8

7,48,3

4,1 4,1

0

2

4

6

8

10

12

USA Japan Germany UK France Italy Canada China Brazil Mexico

Real

GD

P G

row

th (

%)

WORKPLACE MOBILITY LAGGING, BIG CITIES ARE BEHINDMobility index, compared to baseline

Source: Google Mobility Index, CBRE Research, 3 Sep 2020.

-80

-70

-60

-50

-40

-30

-20

-10

0

10

20

Mar

-20

Apr-20

May

-20Ju

n-20

Jul-2

0

Aug-20

% C

ompa

red

to B

asel

ine

USAWorkplace Retail & Leisure

-80

-70

-60

-50

-40

-30

-20

-10

0

10

20

Mar

-20

Apr-20

May

-20

Jun-2

0Ju

l-20

Aug-20

Europe ex. UKWorkplace Retail & Leisure

-80

-70

-60

-50

-40

-30

-20

-10

0

10

20

Mar

-20

Apr-20

May

-20

Jun-2

0Ju

l-20

Aug-20

UKWorkplace Retail & Leisure

Source: U.S. Census Bureau, CBRE Research, August 2020.

BUT THE DIGITAL ECONOMY HAS ACCELERATEDOnline retail sales as % of total retail sales

16%

27%

0,0%

5,0%

10,0%

15,0%

20,0%

25,0%

30,0%

2012 2013 2014 2015 2016 2017 2018 2019 2020 (F) 2021 (F) 2022 (F) 2023 (F) 2024 (F)

The ‘Amazon Effect’&Global Industrial Real Estate

AMAZON MARKET CAP 87.5% OF FTSE 100, MORE THAN CANADA’S GDPAmazon (AMZN) market cap (US$ Trillions)

0,0

0,2

0,4

0,6

0,8

1,0

1,2

1,4

1,6

1,8

2,0

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020

US$

Tril

lions

Source: Macrobond, CBRE Research, 4 September 2020.

��������

E-COMMERCE PENETRATION: PAST, CURRENT AND FORECASTE-commerce sales as a % of total retail sales

Source: Euromonitor, CBRE Research, August 2020.

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

China USA UnitedKingdom

Canada Germany France Brazil Mexico Japan Russia Italy India

2005 2020 2024

INDUSTRIAL RETURNS HAVE OUTPERFORMED SINCE 2017U.S. risk-adjusted returns by property type

Source: NCREIF, CBRE Research, Q2 2020.

0,0%

10,0%

20,0%

30,0%

40,0%

50,0%

60,0%

70,0%

80,0%

90,0%

100,0 %

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

Apartment Office Industrial Retail Hotel

BUT INDUSTRIAL WAS A GOOD ASSET BEFORE E-COMMERCE Industrial assets provide high returns

Source: NCREIF, IPD/MSCI, CBRE Research, Q2 2020.

United States

1980-1999 2000-2009 2010-2020H1

Industrial 9.6% [2] 8.9% [4] 11.8% [1]

Apartment 11.3% 9.0% 10.3%

Retail 9.3% 11.3% 9.7%

Office 8.0% 7.8% 7.6%

Total 9.2% 9.1% 9.4%

United Kingdom

1981-1999 2000-2009 2010-2019

Industrial 14.2% [2] 12.6% [2] 21.1% [1]

Office 10.9% 10.3% 15.2%

Retail 13.4% 11.9% 11.7%

Residential 15.4% 13.1% 10.1%

Total 10.7% 7.9% 8.0%

� High yield � Rental growth � Low depreciation

LONG TERM YIELD COMPRESSION – BLESSING OR CURSE? Composite yields by property type

Source: CBRE Research, Q2 2020.

3

4

5

6

7

8

9

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

Global Office Yield Global Retail Yield Global Industrial Yield

Forecast

%

CAPITAL FLOWS INTO INDUSTRIAL ASSETS HAVE BOOMEDGlobal volume of industrial transactions

Source: RCA (Americas), CBRE Research, Q2 2020.

0

20

40

60

80

100

120

140

160

180

200

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 H1 2020

Tota

l Inv

estm

ent V

olum

e (U

S$ B

illio

ns)

�

INDUSTRIAL LED CAPITAL FLOWS IN LATIN AMERICACRE Investment in Latin America, 2015-2019

Source: CBRE Research, Q2 2020.

0

1

2

3

4

5

6

7

8

9

10

Industrial Office Retail Hotel Apartment

USD

Bill

ions

INDUSTRIAL’S SHARE OF OVERALL CRE INVESTMENT HAS RISENIndustrial’s share of total CRE investments

Source: RCA (Americas), CBRE Research, Q2 2020.

0%

5%

10%

15%

20%

25%

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019 H1…

Shar

e of

Tot

al In

vest

men

t Vol

ume

(%)

PLENTY OF DRY POWDER STILL TARGETING THE SECTOR Fund raised targeting specific property types

Source: Preqin, CBRE Research, Q2 2020.

0 50 100 150 200 250

Land

Hotels

Niche

Retail

Office

Industrial

Residential

US$ Billion

GLOBAL INDUSTRIAL REITS ABOVE PRE-COVID LEVELSIndustrial REITs market cap index (1/1/2020 = 100)

Source: FTSE EPRA, NAREIT, Macrobond, CBRE Research, 7 September 2020.

40

60

80

100

120

140

160

Jan-20 Feb-20 Mar-20 Apr-20 May-20 May-20 Jun-20 Jul-20 Aug-20

Indu

stria

l Mar

ket C

ap In

dex

(1/1

/202

0 =

100)

United States United Kingdom Euro Area Developed Asia

INVESTABLE UNIVERSE HAS EXPANDED RAPIDLYValue of global industrial stock

Source: CBRE Research, 2020.

14%

15%

16%

17%

18%

19%

20%

0

1

2

3

4

5

6

20…

20…

20…

20…

20…

20…

20…

20…

20…

20…

20…

20…

20…

20…

20…

20…

20…

20…

20…

20…

20…

Indu

stria

l Sha

re o

f Tot

al S

tock

Inve

stab

le S

tock

(U

S$ T

rillio

ns)

Industrial Investable Stock Industrial Share of Total Stock (rhs)

But where to invest? Some themes

INVENTORY GROWTH LED BY THE AMERICASIndustrial inventory in sq. ft., by region, in 2020

Source: CBRE Research, Qianzhan Industry Research, Shanghai Jiao Tong University, Stowga, 2020.

0

2

4

6

8

10

12

14

16

18

Americas APAC EMEA

Indu

stria

l Sto

ck (

Billi

ons

of S

F)

United States Canada China Australia United Kingdom Germany France Rest of Region

SUPPLY OF INDUSTRIAL SPACE PER CAPITAIndustrial stock (sq. ft.) per capita

Source: Oxford Economics, CBRE Research, Qianzhan Industry Research, Shanghai Jiao Tong University, 2020.

0 10 20 30 40 50 60

Brazil

Mexico

Italy

China

France

Germany

United Kingdom

United States

Canada

Australia

Industrial stock per capita

North Americas Latin America EMEA APAC

HOW MUCH DEMAND?Annual requirement of 200 MSF+ of additional DC space by 2023 for U.S.

$1BE-COMMERCE

SALES

1.25MSFDISTRIBUTION

SPACE

E-COMMERCE SALES GROWTH AND INDUSTRIAL YIELD Average annual growth in the next 5 years & prime industrial yield

Source: Euromonitor, September 2020.

0%

2%

4%

6%

8%

10%

12%

0%

5%

10%

15%

20%

25%

30%

India Mexico Brazil Italy Russia USA China Canada France Japan UnitedKingdom

Germany

Cur

rent

Prim

e Yi

eld

Ave

rage

ann

ual g

row

th r

ate

Average Annual Growth Rate (lhs) Prime Industrial Yield (rhs)

AMERICAS IS THE MOST LIQUID INDUSTRIAL MARKETLiquidity (% of traded volume in investable stock) by region

Source: CBRE Research, Q2 2020.

0%

1%

2%

3%

4%

5%

6%

7%

8%

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 H1

Americas EMEA APAC

U.S. I&L GATEWAY MARKETSTop industrial hubs based on inventory size, leasing and investment activity

Seattle

Oakland

Los AngelesInland Empire

Chicago

MiamiHouston

Tri-State

AtlantaDallas

Source: CBRE Research, Q2 2020.

OPPORTUNITY MARKETS IN THE UNITED STATES?Cap rate vs 5-year rent growth

Source: CBRE Econometric Advisors, CBRE Research, Q2 2020.

AtlantaCincinnati

Detroit

IndianapolisLas Vegas

LouisvilleMemphisMilwaukee Raleigh

Sacramento

St. Louis

Tampa

4%

5%

5%

6%

6%

7%

7%

8%

8%

0% 1% 2% 3% 4% 5% 6% 7% 8%

Cap

Rat

e

5-yr Rent Growth

TOP U.S. PORTS BY DESTINATION COUNTRY

Trade Partner

Vietnam

Malaysia

Taiwan

Thailand

India

Bangladesh

Sea/Tac

Oakland

LA/LB

HoustonNew Orleans

NY/NJ

Savannah

Who benefits from China Plus One? West Coast ports will continue to dominate, but SE coast ports will see growth with sourcing diversification

Charleston

Virginia

Source: WorldCity, CBRE Research, Q2 2020.

� Covid-19 has turbo charged e-commerce, not that it needed it

� Industrial real estate had a good track record even before e-commerce

� As an investor favourite, industrial has seen outsize cap rate compression

� The US has liquidity, some opportunity and low cap rates

� Non-core markets have high yields, growth and risk

� Europe has development potential, low risk, and low cap rates

� LatAm has growth, needs more stock, and upside in Mexico from reshoring

CONCLUSIONS

INDUSTRIAL RENT AND CAPITAL VALUE INDEXIndex change in H1 2020 (%)

Source: CBRE Research, Q2 2020.

-1 ,0

-0,5

0,0

0,5

1,0

1,5

2,0

2,5

3,0

Global Americas EMEA Asia Pacific

Rent Capital Value

THANK YOU

This presentation has been prepared in good faith based on CBRE’s current views of the commercial real-estate market. Although CBRE believes its views reflect market conditions on the date of this presentation,they are subject to significant uncertainties and contingencies, many of which are beyond CBRE’s control. In addition, many of CBRE’s views are opinion and/or projections based on CBRE’s subjective analysesof current market circumstances. Other firms may have different opinions, projections and analyses, and actual market conditions in the future may cause CBRE’s current views to later be incorrect. CBRE has noobligation to update its views herein if its opinions, projections, analyses or market circumstances later change.Nothing in this presentation should be construed as an indicator of the future performance of CBRE’s securities or of the performance of any other company’s securities. You should not purchase or sell securities –of CBRE or any other company – based on the views herein. CBRE disclaims all liability for securities purchased or sold based on information herein, and by viewing this presentation, you waive all claims againstCBRE and the presenter as well as against CBRE’s affiliates, officers, directors, employees, agents, advisers and representatives arising out of the accuracy, completeness, adequacy or your use of the informationherein.© Copyright 2020 CBRE