 Welcome to Columbia University's Graduate Real Estate Development Conference in 2021. The conference theme is Stop, Go, Pivot. And I'm sure we have all experienced that, its sequence, the rich just ring of the sequence and so on throughout our prior year. Today we're going to start with a fabulous panel about the macro overview. Where are we today? How will the U.S. economy recover? And the presidential election inform the strategy, sector positioning, development trends and investment theses throughout the next cycle. I'm the moderator, Patrice Derrington, I'm the director of the real estate program at Columbia University and the Mark Holliday professor of real estate. I have two panelists. We have Joe Zidle, managing director and chief investment strategist of private wealth solutions group at Blackstone. And we have Dr Richard Barkham, the executive director and global chief economist at CBRE. Welcome gentlemen and thanks for joining us. Well, let's get started with looking at the economy overall. Joe, you and Byron publish every year your 10 surprises for the upcoming year. This year for 2021, which you just recently issued, you say the economy develops momentum on its own because of pent-up demand and depressed hospitality and airlines become strong performers. Fiscal and monetary policy remains historically accommodative. Nominal economic growth for the full year exceeds 6% and the unemployment rate falls to 5%. We begin the largest economic cycle in history, surpassing the cycle that lasted from 2010 to 2020. That is a five-powered economy that may indeed be sparked by some very recent actions such as the stimulus and economic readings such as we're seeing in rising oil prices, etc. Are there some things in particular that you find to have very interesting and significant potential in achieving this surprise? Well, yes, and Patrice, first I'd like to thank you for having me as a part of today's panel discussion. I'm looking forward to a really robust discussion over the course of the next few minutes. So the first point I'd make here on our view, my partner Byron Ween and I published the annual list of 10 surprises on Monday, January 4th. It was the 36th annual edition of the 10 surprises. And what we wanted to reflect at that time with the surprise you mentioned was a more optimistic view or more bullish view of the upcoming recovery. So we wanted to really plant a flag in the ground and be ahead of consensus with respect to our growth estimates, as well as unemployment as well. And we really were of the view and still are of the view that the record stimulus would end up filtering back into the economy and end up creating a self-sustaining recovery or a virtuous cycle. And so what I would highlight here quickly is just that if you look at the damage done economically as a result of COVID, we had about a $2 trillion drop in production here in the United States. And so far, there's been about $5.3 trillion in fiscal stimulus. And there is potentially more coming. Now there's the discussion of an infrastructure bill sometime later in 2021. So this fiscal stimulus that's been passed and is in the process of being dispersed currently is the largest fiscal policy response we've ever seen to a recession since the New Deal era. So so far, we're at about fiscal stimulus of about 23% of GDP and potentially going higher. And that is something that's second only to what we saw in the New Deal, which was about 40% of GDP at the time. Now interestingly, if you look at our policy response relative to other developed countries, we've done more since December than all of Europe and Japan have done combined since the beginning of COVID. So our policy response here has really been historic. For every $1 lost in income, there's been $11 in government transfers and benefits. So what we want to really, the way that we're positioning our views is that this is going to be a highly synchronized start to the recovery. And as a result, we think it will form the foundation for what will be a very long cycle. And by highly synchronized, I mean it's not just households. I think everybody here on the Zoom is aware of households in the United States having record savings, record net worth, record personal income. But when I talk about it being a highly synchronized recovery, it's because it's not just households. If you look at corporations, they raised record amounts of precautionary cash in 2020. And as a result, cash as a percentage of assets at corporations is the highest level it's been since the 1960s. And then thirdly, state and local governments are forecasted to produce their first surpluses since 1978. So normally these three cohorts, households, corporations, and state and local governments would have a more staggered start to a recovery, right? Because you have to rebuild income, then rebuild savings, then pay down debt, et cetera. But in this recovery, it's very highly synchronized in that you've got basically record cash at the household level, record cash at the corporate level, and now surpluses at the state and local government level. So that's going to introduce what I think will be a very strong front-loaded recovery. Now the part on it being self-sustaining, and I'll just finish with this point, is when the economy was relatively closed due to COVID, when we were restricted on movement, you saw a big boom in the purchase of goods. The goods side of the economy is significantly smaller than the services side of the economy. So what we saw through most of 2020, and we're still seeing it today, is a boom in the goods side of the economy. Now when you're spending on goods, generally that money ends up being exported, right? Because perhaps you're buying computers, laptops, iPhones, iPads, washers, dryers, et cetera. That money generally goes to low-cost manufacturers around the world. But as we reopen the services side of the economy, it introduces what I would consider to be more of a virtuous cycle. Because in services, one person's spending is another person's income. So as the economy reopens in the second half, and you've got all this cash, and the idea of the pent-up demand, as it goes into services, it ends up creating a self-sustaining recovery in that we will end up, I think, driving a lot more or recycle the money in ways that we haven't been necessarily up until this point. Excellent. Thank you very much. Very, very exciting. And definitely, we've got some constructive times ahead with all of this capital. And also this notion that the service sector is a very local, local, local economic dynamic, which reminds us, Richard, and it's a wonderful segue for you, real estate is often regarded as being locally constrained or locally beneficial. Now, you've commented that you see record household cash and excess savings in the economy also, and that you see this as a major source of pent-up demand for consumer spending. Just as Joe was saying, and that division between goods and services and so on is going to be critical. What specific areas of the economy do you expect to boost consumption, and particularly maybe the consequences for real estate, given the audience we have today? Well, if I could start with just a few comments on what Joe has said and what you reiterated. I think that is our house view that the US is going to see a very strong rebound in 2021, 7% GDP growth. And indeed, some of that growth will continue into 2022, maybe four or five percent growth. I don't and we're reasonably bullish as well, you know, because you've got the stimulus and you've got consumers with a lot of cash. I don't I would just a note of caution. I don't think we can quite write the virus off yet. And we're watching very closely the new variant of the vaccine of the virus. And that is a lot more infectious than the old the old virus. If you like. So it's now dominant in Europe and it's what's really caused the surge in cases in Europe. And I would be a little bit worried that places like Texas and Mississippi may have opened up a little bit too soon. And I think there's still a you know, you've got the the vaccine rollout, which is proceeding extremely nicely in the states. So it's doing a great job of it, you know, to two and a half million people being vaccinated every day. But I do want to just, you know, draw people's attention to the new variant, which is highly infectious, infectious. And the the rates of new infection have been dropping recently, but seem to have leveled out now. So that's just just an ongoing threat that we've got there. But I think, you know, and then there's the question that Joe raised about whether this initiates another 10 year cycle. I don't think the the the virus was really signalled an end to the old cycle. It's more of an external shock. You know, this this kind of big shock didn't have many of the self-destruct characteristics of an end of cycle. And what that means is some of the imbalances that pre-existed continue. So whether that can sustain another 10 year cycle, I would be a bit cautious on as well. But certainly a good growth here in in 2021 and 2022 fingers crossed on the virus. What does that mean for real estate? Well, I mean, I think, you know, Joe referred to the services economy. And we're already seeing it in the in the states that have opened up, Texas and Mississippi, huge increase in eating out. So, you know, that kind of food and beverage industry really hard hit by covid. That's going to come back really strongly really quickly. People are stir crazy, sitting at home. And of course, that draws, you know, draws footfall into other areas of real estate. So, you know, I would see probably some upside, some surprising upside in physical retail. People have been sitting at home buying goods on the internet. But I do see a revival in physical retail probably led by food and beverage and just a kind of post pandemic surge in wanting to get out and do things. You're also seeing travel increase as well. So, you know, airline travel is going up. One of the areas the hotel, you know, the hotel industry was the kind of domestic leisure that held up quite well. I mean, I would say high up quite well, but did better than expected last year. So I see some of the demand coming through into the hotel sector as well. So, you know, those are two areas that are going to be growth driven. The return to offices, I think, is really around the vaccine rollout. And we're expecting offices, you know, they're still at relatively low level of occupancy, maybe sort of, you know, somewhere between 10 and 20 percent. But we would see that that would that would start to, you know, that that will follow the rate of vaccination, which, you know, we could be up to 90 percent vaccination by Q3. So I think from middle of the second quarter, we will begin to see people returning to the office. And already we're seeing a little bit of a turning sentiment in office leasing. Thank you. Well, Joe, I'm sure you'd like to say a little bit about how you feel about the end of the prior cycle and whether we've adjusted for it. Thank you, Patrice. Sorry about that as having a problem on muting. You know, I think Richard makes a great point about the external shock. And so I think there is a bit of an open question as to whether we're starting a new cycle here or if it really is an extension of an old cycle. One of the things that I spend a lot of time focusing on is the slope of the yield curve. And, you know, what I would note is pre-COVID yield curves around the world had inverted and they had inverted and principally when I look at the yield curve, I look at the difference between the 10 year and the two year. And historically, the yield curve in the United States has been the most accurate predictor of recessions. Historically, when the yield curve is inverted, since the 1970s, you've had basically seven inversions followed by seven recessions. The yield curve had inverted last August of 2019 on a pre-COVID basis. Now, the curve will never tell you what's wrong. It just tells you that something is wrong. And at the time, there were many imbalances, as Richard talks about. I think a lot of them do continue today. And I think a lot of the damage at the time was due to trade and trade wars. So whether or not that's really been corrected or not, I think is an open question. But the reason for my optimism here on the start of this new cycle is because what we have done is we've rebuilt savings, we've increased income, we've reduced debt, and rates have gone even lower. Now, I think we've seen a floor on rates. So I do expect the curve to steepen even further from here. But generally, as we're exiting COVID, we're exiting it on some of the strongest footing that we've ever seen among both households, corporations, as I mentioned before, state and local governments. Now, the reason the idea behind a long cycle is if you think about the demographics here in the United States, as an aging population, we've generally traded strong recoveries for long recoveries. If you look at all recessions going back to the 1880s, I don't think it's a coincidence that three out of the four longest expansions have been in the last 30 years. Generally, in the second half of the 20th century, from post-World War II period to maybe, so 1945 to the year 2000, those periods between recessions, those expansions, would generally see about 4.5% GDP growth. But as the US economy aged, as boomers began to turn 65 and retire, we've generally been in a slower growth environment. But it's also translated to longer cycles. That's one of the reasons why we're optimistic that we are entering another one of these long cycles. We're going to see a front-loaded recovery, as I'd mentioned. And I do very much agree with Richard on his assessment for the above trend growth this year as well as next year. But my view is that we will settle into what will be a longer, but generally lower growth cycle. It's just, in my opinion, it's just a matter of demographics. In our work, we like to say that demographics end up being destiny. And so what we know of aging populations is they tend to trade longer recoveries for strong ones. And we are starting to see, as you say, slightly rising interest rates, but that's off incredibly aberrant historical levels. There's obviously going to be some benefits. And given the demographics, as you say, we've got a lot of pensioners who rely on higher savings rates. And higher interest rates on cash accounts. So do you see some benefit, even if we do see some higher long rates and steeper yield curves? Yeah, it's a great question. And I think the steeper curve reflects a healthier, call it more normal or self-sustaining cycle. So I'm encouraged by the steepening of the curve. If you look at the last three recoveries, the average steepness in the curve is achieved in the first two years. So if you look at the last three recoveries after the 1990s recession, then the tech boom, then the great financial crisis, in the first two years of the recovery, the curve starts to steep in. It peaks at an average of about 250 basis point steep. That's obviously going to lead to some type of rotation, in my opinion. I think we're going to see a rotation from long duration assets to shorter duration assets. And I think we'll see that across the board, not just in fixed income. We're seeing it in equities today, where you do see the 10-year Treasury yield rising. You see, quote unquote, longer duration equities underperforming. You can think about long duration equities as speculative pre-revenue companies, non-earning companies, and zombie companies. These are companies where their cash flow is disproportionately weighted to the distant future. And so when we see the 10-year Treasury yield rise, those long duration equities that tend to have a longer payoff are underperforming. Now, the reason for optimism is a steeper curve brings banks back into the equation in a really positive way, because it means they can earn net interest margin spread. And that's not only here in the United States, but the spillover has been global. The rate spillover has been global. So we're seeing higher yields in Europe as well. And so if you look at things like European banks, from the time when the 10-year Treasury yield bottomed on August 2nd of 2020 at around 50 basis points, you've seen European banks up about 45% through the middle part of March. Now, in the entire last cycle, which was March of 09 to February of 2020, the same European bank index in Euro terms was approximately flat. It was negative on a price return, but when you add in the dividends, it was slightly positive. So you've had European banks up 44%. Just with the steepening of the 10-year Treasury. So I think it's healthy globally. So hopefully that helps. Thank you very much. Absolutely. So, Richard, talking some of these specifics about capital and capital flows and what it has meant for different countries and investments, you wrote in your 2020 year end report that the foreign investment in the US fell to a seven-year low of $28 billion. And that's down approximately 31% from 2019 and so on. So on the other hand, you were very specific in where you felt the major falloff or the most severe falloff of foreign interest into the US came from. And this, of course, has huge implications for such a capital-heavy asset cost, such as real estate. So what do you anticipate these changes to continue or are we going to see different flow patterns as we move out of the crisis of 2020? No, I mean, all things, these things tend to follow GDP. So this kind of strong growth in the United States would tend to, I think, suck in overseas capital into the US, I say our asset markets. So I'm actually British, but US asset markets. And I think what we're going to see is that will be facilitated, I think, by continued weakness in the dollar. So this kind of super growth in the United States is going to, I think, we're going to see probably a record trade deficit as the US continues to suck in goods. That is difficult. Forecasting currencies is really a mug's game and I don't really want to get into it, but we've seen dollar weakness. I certainly think we wouldn't see any, there's no reason in those circumstances for dollar strength. And I think that kind of the US showing the strongest growth in the global economy, apart from China, is going to suck in, I think, foreign capital into US real estate assets going forward. And interestingly enough, even over the course of this crisis, because the policy support has been so intense, not just the fiscal policy support, but also the liquidity support given by the Federal Reserve, actually cap rates in the United States have actually been surprisingly resilient. We've even seen cap rate compression in the industrial and logistic sector. We've seen it in the multifamily sector, I think under conditions where the US grows ahead of the rest of the world and foreign capital targets the US, you're likely to see further cap rate, the very least cap rate stability and probably cap rate compression. There is just, I think, if we survey the global situation a little bit more closely, China is forecast to grow at 8.2% or something like that this year. It's quite obvious to me that the tightening cycle is just about to begin. We're hardly out of the crisis and the tightening cycle likely to begin in China, I think. China is likely to rain back the stimulus. So that will take a little bit of heat out of the global economy and might, in a strange way, that I wouldn't bore everybody by explaining probably likely to act against dollar weakness and perhaps not give us the dollar depreciation that we might otherwise have seen. But we expect capital investment into real estate from domestic sources and international sources to be pretty robust, particularly in the second, third and fourth quarter of this year. That's great. Well, capital flows are one of the key drivers of real estate performance and traditionally the other one has been employment growth. Obviously it increases the demand for offices, it increases what people can pay for multifamily residential, it increases retail. Just one of the key leading indicators as our students are often told and they certainly know by the time they graduate. So, Joe, would you like to speak a little about this employment outlook? You've said that it's going to be very, very strong. We do have the stimulus and we have the service sector, as you say, looking strong. Is this going to be enough to keep employment growth solid through the next few years as real estate people plan the demand and supply of their assets? I think it's a great question. I think we will see very solid labor growth. In fact, there's a risk here that we're beginning to see in the market and that is we're actually starting to see tightness in labor markets. And specifically what I would highlight is the NFIB, National Federation of Independent Businesses, a really strong proxy for small businesses here in the United States and they reported a record, 40% of companies, a record reported that they found job openings were hard to fill and 91% of them in the most recent survey, which covered February, found fewer no-qualified applicants. So, with an unemployment rate at around 6.2%, it sort of boggles the mind that companies are beginning to see labor tightness. There are some explanations to it. One is schools being modified for virtual or at home learning and that has had a disproportionate effect on women and specifically the causing women to drop out of the labor force in rates well in excess of men. In fact, if you look at the labor force participation rate, even though we have a relatively high unemployment number of 6.2%, the labor force itself is smaller than it was on a pre-COVID basis because so many people have been forced to drop out or have dropped out for other reasons. And if you look at the demographics, women lost 220,000 more jobs than men did last year. Some of it, a small portion of it is sort of explained by gender distributions among industries. But a more significant driver is when you look at mothers and the labor force participation rate for mothers is 4% below where it was on a pre-COVID basis. And so, as schools reopen, we think the prospects for childcare will improve and that should bring people back into the workforce. There are simply other people who may have just decided to retire early. For instance, there's 10,000 boomers that turn 65 every day. So it could very well be that we're looking at a structurally smaller labor force, which could actually exert some upside pressure on wages. So we could end up having a tighter labor force and one that drives wage growth. It's obviously very, very good for households, but it does run the risk of creating some longer term or core or stickier inflationary pressures. Thank you. And so Richard, another aspect of this strong economic activity and increasing anticipated strength is improving margins for particular areas of the various sectors of the real estate market. And one of these that you have really focused on and highlighted in your recent commentary has of course been this industrial sector, which previously we worked quite so quickly to align. It, yes, it certainly had its correlation, but you have pointed out that this industry, the growth in the industrial sector has been particularly strongly correlated with the economy this time. And you have discussed the increased growth, rental growth in this expanded logistics activity generally because of how we're now ordering and buying and being supplied with our goods. And of course this differs from our traditional focus on multifamily and office. So do you anticipate this continuing? Is the sky the limit in terms of the new, not your grandfather's industrial property sector? Yeah, I mean, I think we do. It was really surprising when we kicked off this whole pandemic crisis. We thought there might be a one-year hit to the industrial sector, two-year hit to the office sector, and a three-year hit to the retail sector. Well, we've telescoped those all back in a little bit. And indeed the industrial sector actually didn't really break step. And Q4 in 2020 was a record quarter for the level of square footage net absorption. Now I'm going to forget the precise figure, but it was about 280 million square feet. And we continue to think that the next 24 months is going to see extremely high levels of net absorption of space. And it's driven by the things that you would expect. Obviously the high rates of GDP growth and the need to ship more goods to consumers is all part of that. But I also think that American suppliers will want to, and all of the American distribution system, probably want to hold higher stock levels than they had in previous cycles. The shock of the disruption from COVID is still fresh in mind, so kind of higher stock levels, higher levels of economic growth. And the growth of e-commerce, albeit some of that will slip back. I think post-pandemic as people go back to the shops, as I've explained. But we're seeing e-commerce moving into, out of kind of hard goods also into the distribution of grocery as well as a strong growth area. So refrigerated logistics is another area that had been growing pre-COVID, but I'm going to make the worst joke on the planet, but refrigerated logistics is an extremely hot sector. So I think we do see that continuing extremely strongly from the next 24 months. And then I think we follow the scenario that Joe had outlined, that growth will probably slip back to a, unless we get some other big event, or the coming boom in the U.S. economy actually proves a lot bigger than we were thinking. Then I think growth will slow back to that relatively low level of economic growth. I'm going to throw in something that you didn't ask about. I think to a certain extent, how the economy grows from maybe 23 onwards depends a little bit about on immigration policy, because we may well run into labor force constraints. And the U.S. then has a choice whether it can grow the economy without inflation pressures building up, or whether it can start to solve some of the labor supply problems by higher levels of immigration. Immigration has dropped off quite considerably over the last 12 months. So I think that's a good point. Immigration has dropped off quite considerably over the last 12 months. Partly that is policy, partly that is COVID. But I think it is possible, the long cycle theory depends to a certain extent, I think, on immigration decisions. And immigration decisions, as we know, politically fraught at the moment and will probably take quite a while to resolve politically in governance and so on. And both of you, Joe, you mentioned indications of tightening labor markets. So this is the usual outbreak of inflation. And so this has led to recent changing predictions, such as by the Federal Reserve just this week, estimating inflation of 2.6% for 2021, something we haven't seen for a long, long time. And then we have Larry Summers warning about inflation and its undermining of asset values. So what's your view on this potential for inflation to bounce back problematically? Or is it going to be manageable? Keeping in mind, let me say, that commercial real estate investors, we really view real estate as offering a hedge against inflation. We have built-in consumer price indexes in leases and so on, and even actually benefiting from it in a not terribly rigorous analysis of appreciation, a more of a nominal appreciation in asset values. But we tend to think of it as really being more beneficial than lacking, until, of course, you get those nasty interest rates on your deck. Yeah, it's a terrific question. And I think this inflation debate is one that we're going to be having, not only now, but I think we'll be having it for the next couple of years, because I do think there is a risk. The way that I would look at it, and I'll offer maybe a couple of comments, I think we'll see a reflation now. But the long-term inflationary picture, I think is a much different one, and I'll highlight a couple of reasons in a minute. But the reflation now, I think, is, number one, just part of some of the historic excess liquidity that we see, not only in the part of households, but corporations, state and local governments. Number two, a reflection of an economy that will open up where you'll have the service sector maybe not necessarily having been able to scale up to handle the demand. And number three, just simply the base effects that a lot of the low inflationary numbers from the second quarter of last year are going to begin to roll out of CPI. So there's some mechanical reasons as to why inflation will rise in the short term, followed by some actual fundamental or what I would call economically-based reasons. But inflation over the long term, I think is a bit of an open question. And I might start off with maybe just a rough paraphrase of a comment that Fed chair Powell made in front of Congress just a couple of months ago when he said, the inflation that I grew up with as a kid is gone. And what he's referring to there is the type of inflation that we saw in the 70s up until it was broken in the early 1980s. There is an argument and I subscribed this point of view that says demographics are destiny and an aging population is inherently disinflationary. So to separate out the short term, which is going to be a reflation, which I think we'll see over the course of the next couple of years as a result of all of this excess liquidity versus the long term, which I think will be over the course of a very long cycle, I would envision that this tug of war between the short term reflation and long term disinflationary forces is something that's going to play out on a real time basis for all of us. And it will affect asset allocation and portfolio decisions. The long term is this. If you look around the world at the countries with the greatest proportion of people that are 65 and older, those are the same countries that have the highest proportion of zero rates and negative yielding debt. And I don't think that's a coincidence. In the United States, 10,000 boomers turn 65 every single day. The first boomer is a retired public school teacher living in South Jersey. If you Google her, you'll see a picture of her on her boat. The name of her boat is first boomer. The last boomer was born December 31st, 1964 at 6.45 p.m. local time in Hospital in Hawaii. He'll turn 65 in the year 2030. Between the first and last boomer, 74 million people. Now, when you think about that in the context of what we know of Europe's demographics and Japan's, it means that across the U.S., Europe and Japan, one out of four people is 65 or older. That's 200 million people across U.S., Europe, Japan. If you look at the countries with zero rates and negative yielding debt, it's Europe, Japan, and then of course the U.S. I don't think that's a coincidence. If this were a course on economics, somebody would raise their hand and say, but wait, Milton Friedman said, inflation is everywhere always will be a monetary policy phenomenon. Milton Friedman argued that for the first time in June in 1970 in a publication. What I don't think Milton Friedman was maybe quite aware of in his day was the role of demographics because the data he had at his fingertips in 1970 was all pointed toward a booming generation, a booming population in U.S., Europe, Japan. So I think the shorter term is about the economy absorbing record liquidity. Longer term, I don't think it's a coincidence that the countries, the oldest countries in the world have the lowest rates. So I'll stop there. And lower inflation rates are actually more historically prevalent if you go back some centuries and so on. So maybe the higher rates was the aberration. And Richard, I know that you're constantly looking at inflation with respect to the various property types, different asset values, different return metrics and so on. So would you like to comment on the anticipated impacts and nuances for the property sector for us? Well, I mean, first just to, I think, you know, our general view is that, you know, similar that despite the fact that we've got all this fiscal stimulus, we do see inflation trending up over the next 12 months or so. And it might just trend up a little bit higher than we expect. And it will create a lot of chatter about, you know, the future and that, I think it will create a jittery bond market you know, I think we do expect it to settle back down. And, you know, this is certainly not going back to the 1970s. And, you know, even now, even with all the economic stimulus we've got, you know, if you take the unemployed and the underemployed, even in the United States, you've got 18 million people without jobs. So, you know, despite these record economic stimulus going in, you know, there's a lot of labor still to be absorbed into the market. And we may see odd sectors of the economy where labor markets are extremely tight and we get some wage inflation, but that probably not going to translate into a general inflation going forward. And this, you know, there is still, there are negative output gaps. You know, there is more supply than there is demand. In most of the G7 economies over the next two or three years. So not much, not enough demand pressure to stoke up inflation. What does all of that mean? But nevertheless, you know, I wouldn't want to write Milton Frieden off completely. You know, you've, you know, the last 10 years we saw the kind of decade when the money supply expanded by something like 4% per annum and we had a decade of low inflation. You know, the money supply has just expanded by about, I don't know, 50% or 100% depending on how you care to kind of classify. And it's not really clear nowadays how you do classify the money supply anyway. So I wouldn't want to write that up. And that might have some effects that we can't quite see at the moment. So we don't want to write that up. We want to keep our eyes open for economic anomalies and just keep alert to what they're telling us. Probably all of that monetary expansion will go into asset markets, but it might not. And we can't write that off completely. What does it mean for real estate? Well, I think, you know, one of the attractions of real estate is an investment asset class. Obviously, it's income producing potential and it's cap rate. You know, I think we would probably see bond rates. I think they're up at 1.7% today. Probably likely to continue to nudge ahead. My previous forecast was for the 10-year T to be at 1.8% by the end of this year. I might have to revise that up a little bit. And maybe we'll see bond rates, you know, nudging meaningfully above 2% over the next 12 months or so, maybe even up to 2.5%. And the 10-year treasury is really what property investors price real estate against. But I think, you know, there are enough offset. So, you know, theoretically, one might begin to think, is that going to push up cap rates? But I think there's enough spread between, you know, real estate cap rates. Real estate spreads over 10-year treasuries are actually pretty elevated. And that's been one of the reasons cap rates have been so stable. That's been enough of a spread to counteract the risk that's in the system over the last six or nine months. I think, you know, as risk diminishes, you know, I think investors will be comfortable with seeing that spread diminish. So I don't see too much upward pressure on cap rates in any sector. In addition to that, you know, positive factors, you know, our econometric models, you know, also pick up impacts, positive impacts on cap rates coming through from inflation, positive impacts, i.e. compressing factors on cap rates coming through from rental growth, which is, you know, set not exactly to turn or we've got high rates of rental growth. I'm talking about the office sector, probably see a bottoming of rents in the next 12 months, and people can look forward to some rental growth. And, you know, the other thing that kind of keeps downward pressure on cap rates is just quantitative easing. You know, central bank actions around the world have been quite significant in depressing cap rates. So, you know, I've talked a little bit, that's a bit of a rambling kind of discussion. You asked the question, what about inflation? Inflation and real estate, generally inflation, you know, investors switch to real estate if they get a whiff of inflation. But I don't think there's enough inflation to push bond rates out far enough to, you know, to give us any meaningful upward pressure on real estate cap rates. By contrast, I think the counter, there's enough spread and there's enough countervailing forces to keep cap rates stable or even see some compression over the next 12 or 24 months. Thank you, Ed. It seems as though both of you are welcoming, you know, we need some healthy inflation. So it's all a matter of quantum, of course. And maybe we'll have that Goldilocks scenario for real estate whereby we have some good inflation so we get our incomes going up, rental incomes going up and so on. And that gives us enough spread over, you know, moderately rising yields, debt yields. So let's focus on that outlook and sleep at night for a while. So thank you, both of you gentlemen. Now, we're just going to finish up with some closing thoughts. The audience today includes many real estate professionals globally. We've got people tuning in from all over the world and particularly a lot of students in connection with our Columbia real estate, a graduate real estate development program. And they're going to be either hiring, expanding their real estate businesses in this, you know, coming scenario or this more constructive scenario. And of course students are trying to find employment in this industry. So do you have any specific thoughts about what you think might be those interesting areas for expansion, growth of the professional activity? Yeah, maybe I'll comment on that a little bit. We've just released our global investor intention survey. And I think, you know, one of the interesting things is 50 odd percent of investors are deploying ESG strategies. Another 30 percent of investors intend to, you know, deploy ESG strategies. So, you know, I think, I think, you know, all of the traditional areas of real estate hiring are going to be strong. So I think your students are looking forward to quite a good market. But if they wanted to position themselves for the long term, they might think about how they play a role in decarbonizing the economy. That has, you know, that's extremely important in Europe. It's got slightly less resonance in the United States. But it's still, I think, you know, some people would hold the view that the U.S. has taken a strategic decision to green its economy. So I would say, you know, both people who are investing and developing and even, you know, on the occupier side need to look at sensible ways that they can, you know, work with the built environment, the built stock to make a contribution to decarbonizing the economy. Mm-hmm. Thank you. And Joe, that real estate mammoth at Blackstone, what's their focus these days? Well, I would really underscore Richard's comments on ESG and the long-term role that that's going to play in the real estate and in so many other industries. So I think that's a critically important area. And, you know, you might even point to China, which just released details on its 14th five-year plan. And what wasn't contained in there were specific GDP targets. But what was contained in there were specific targets for research and development, as well as targets on climate and decarbonization. So I think it's a worldwide phenomenon. I think it will shape the next decade or more. So I would very much agree with Richard's comments about positioning oneself for the ESG and decarbonization sort of trends. I think they are secular long-term trends. Last thing I'd mention is just the value of networking, especially for the students out there. In my own history, as I look across the various different jobs that I've held in the finance industry, one thing that stands out is virtually every job I've ever had has been the result of knowing somebody, either in the field or at the specific company. And so I think networking is critically important. Beyond just LinkedIn, anything that folks can do out there to create personal connections, I think will end up helping them in the long term. Thank you. Thank you. That's good advice. And you'd be absolutely amazed at how our students have built up all sorts of creative forms of networking, despite the COVID restrictions. So your words are well taken. Thank you both gentlemen. It's been a fabulous way to start our conference. Optimism but measured. Real estate continues to be something that we should continue to love. So we'd like that. Thank you to you both and we'll see you soon. Bye. Thank you. Bye.