By MICHAEL AUSHENKER Staff Reporter Calabasas-based real estate brokerage Marcus & Millichap Inc. has published its coronavirus report on how the COVID-19 outbreak will affect the commercial real estate market, and the news is ultimately mixed — industrial and self-storage will face minimal impact while hospitality and retail would suffer the hardest blows. The early March report, “Coronavirus Outbreak: Implications for Commercial Real Estate” discussed how stock market volatility showcases real estate stability and yields. “While the stock market was particularly robust last year, with the S&P 500 delivering total returns exceeding 25 percent, equities recorded a major correction that erased a significant portion of the gains,” the study said. “In the ensuing flight to safety, long-term Treasury rates dropped to a record low, offering real estate investors an exceptionally low cost of capital and some of the highest levered returns in 30 years. Strong capital market liquidity and sound underlying real estate space demand remain pillars of support for commercial real estate.” The study also revealed that uncertainty drives interest rates to record lows: “(Since the disruption to China), investors, focusing on the downside risk potential of the outbreak, drove significant capital to the safety of the bond market, pushing the 10-year Treasury rate to an all-time low while driving the S&P 500 down by 11.5 percent in the last week of February, the largest one-week stock market drop since the financial crisis. Given the nature of this fast-paced correction, financial markets will likely remain extremely fluid until confidence is reestablished.” A sturdy economy withstands headwinds, the report noted. “While the coronavirus will weigh on the U.S. economy in the first quarter, a recession is not imminent,” the study claimed. “Expectations of weaker exports, reduced tourism and supply chain-related shortfalls will moderate the pace of economic growth, but low unemployment and comparatively strong consumption levels should offset the headwinds unless the outbreak amplifies significantly, or confidence levels drop dramatically.” Empowered by low inflation, the Federal Reserve delivered a surprise March 3 rate cut to reinforce the economy. “Although Wall Street already expected a 50-basis-point cut at the Fed’s March 17 meeting, the Fed adjustment sparked an additional decline in the 10-year Treasury rate,” the study said. Despite the barrage of COVID-19 headlines and its effect on financial markets, real estate investment activity remains positive, according to the report. Nevertheless, there is a dire caveat which, only days after the report, came into fruition, as the stock market saw unprecedented drops and pauses. “Potential coronavirus-related disruptions to the economy and investment market would likely stem from public policies discouraging or restricting travel and public events,” the report said. “In addition, a major sustained drop in business and consumer confidence in reaction to the wave of negative headlines could potentially restrain spending and spark an economic slowdown. The other substantive risk factor stems from financial and stock market volatility, which, if severe enough, could undermine confidence levels.” The analysis predicted a negative impact on hospitality and retail, including a downturn brought on by “an aversion for public spaces” that “could hamper social engagement spaces like restaurants, entertainment venues and fitness facilities.” However, a rosier outlook remained for industrial. “While the flow of goods from China may taper over the short term due to the shutdown of several Chinese factories, this poses little risk to industrial space demand,” the study said. The self-storage sector should also remain neutral.