Impact of COVID-19 On The Global Real Estate Market

Impact On The Global Economy

Growth within the global economy came to a rather unexpected stop in Q1; the first real global quarterly contraction since 2011. While different parts of the world are at various stages of dealing with the Coronavirus epidemic, all global regions have seen a substantial slowdown. There continues to be a high degree of uncertainty for the outlook in a rapidly changing environment. A sharp recovery is looking less likely, and Smart Pads recommends taking a scenario planning approach while maintaining agility and preparedness ensuring that robust continuity planning is factored into recovery efforts.

Global Policy Response To COVID-19

The COVID-19 pandemic, first and rightly so requires a health policy response. Along with health policies, governments around the world have also applied various social and fiscal policies to help support people, businesses and local economies. Within the real estate sector, policies vary by country but include moratoriums on evictions, mortgage holidays and retailer tax reliefs.

Real Estate Capital Markets

Over the short term, real estate investment activity is anticipated to slow down as challenged around valuation and the broader uncertainty create barriers to investors ability to appropriately understand risk. Defensive sectors such as healthcare and logistics assets continue to gain interest as active investors consider income stability, operation criticality and occupational density to be key factors in mitigating asset-level risk. Despite having enough liquidity across debt and equity, lenders and investor alike remain in a phase of uncertainty surrounding values and asset management. Regardless of fluctuations in sentiment and activity, the overall trend has been for higher allocations to real estate, and Smart Pads see no reason for this trend to reverse over the medium to long term given the advantages of real estate investments.

Looking Beyond The Pandemic

Generally, the way in which we live and work is changing, and many of the emerging new trends will become part of the ‘new normal’. At the same time, many of the familiar structural trends that we had seen pre-COVID-19 will be reinforced and will continue to shape the real estate sector. The Team at Smart Pads believe this will include growth in corporate outsourcing, rising capital allocations to real estate, technology and sustainability.

Ummar Hanif BA CIHCM