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Real Estate

Real Estate Leaders Extend COVID-19 Impact to 12 Months

3 MIN READ May 22, 2020

 The impact of Coronavirus (COVID-19) is being felt around the world, but how long will its repercussions last? Global real estate, infrastructure and capital market leaders believe that the impact will be felt for longer than forecasted, igniting calls for further government and fiscal intervention.

During this week’s GRI eMeetings, over half of the participating executives were pessimistic about seeing any recovery signs for at least a year, when just last week the sentiment was moderately positive, with predictions that recovery would be seen in six months. Yet it emerged after a meeting led by Holger Schmieding, Chief Economist, Berenberg Bank that while the immediate pain will be a great shock to the economy, within 12- 24 months the effects will level off and growth should resume as normal.

Although the real estate sectors and regions that were expected to be hardest hit were those that depend heavily on tourism and hospitality, it was retail landlords who took the worst blow. Government, lenders and the private sector must find a way to support businesses in these industries, if potential insolvencies are to be avoided. All attention has been placed on protecting cash flows. Members discussed that since capital will be frozen for some time, the government must take all safety measures to buffer the economy with rates, taxes and legislation to protect landlords and tenants.

As Central Banks are putting in place financial measures to brace the economy, fears over potential future inflation scenarios seem unlikely, as a weakened labour market and decreasing consumer inflation will act against government spending. Short-term declining GDP values will only be relevant for 2020 if the worst of the crisis is not over by May, but long-term we could face zero growth in the Eurozone within the next three years, despite the monetary policy put in place by the EU Commission. Focus points will be to help governments buy up bonds and enterprises to help foster liquidity.

While the industry is aligning its strategies to reduce the impact of this pandemic, new opportunities may surface. It was argued that new defensive sectors could emerge, such as banks, petrol stations and supermarkets. Assets in high demand such as data centers and logistics assets that can position and adjust perfectly to a shift in a purely online economy could also increase. 

Deal flow and generating new business, have not suffered greatly yet, but the industry may see investment suspended as time goes on, especially with increasing likelihood of continued lockdowns. From the purchasing side, even if prices present bargains the unanswered question remains as to whether the economy would bounce back through the credit, inflation and supply chain impacts to be actually worth it.

On a global scale, the Asia-Pacific region should be the first to recover from the impact, with the US following as a close second. Comparing the Eurozone and the United States, recovery levels and timelines will be dependent upon several variables, such as supply chains, potential political crises, health systems and responses, as well as crashes in oil and commodities and interruption demand.  

The global economic outlook is constantly changing and information plays a vital role for decision-makers to establish resilient mitigation strategies. GRI eMeetings offer an online platform for C-level executives to exchange information from primary sources and generate valuable relationships anywhere in the world.
Click here for more on our eMeetings and to sign up for the next session.

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