Joint SPR/IPF Global Real Estate Outlook
Tuesday, 8th September 2020

We’re all epidemiologists now

In a sweeping view of the impact of Covid-19 on global real estate markets, Sabina Kalyan of CBRE Global Investors proposed that economists and analysts now need to be epidemiologists too.  Waves of the pandemic are hitting the world’s real estate markets at different times and the severity of government-imposed lockdowns also varies widely. Real estate players need to understand the timing of these trends in order to assess their potential effects on markets.

Kalyan’s key real estate take-aways were that although retail would not bounce back, offices most likely would – depending on the balance between increased home-working and the need to lower employment densities in the office – while residential and sheds would remain resilient.


Turning to global flows of capital into real estate markets, Simon Mallinson of Real Capital Analytics noted that after a first quarter when regional flows followed recent trends, Q2 2020 saw a dramatic retreat in liquidity, ranging from a 20% fall across European markets to a 40% decline in Asia.  Nearly all global city markets have suffered.  The few bright spots include most German markets, which were held up by the strength of domestic demand, as well as most industrial and apartment segments worldwide.

In the panel discussion led by Oliver Kummerfeldt of Schroders, Kevin White from DWS New York gave a snapshot of the US market.  Although the situation in New York is much better now with only a hundred new Covid cases a day and life returning to the city, office rents and values have probably fallen by 10% since the start of the crisis, although the lack of transactions makes it difficult to be sure.  Retail has suffered even more, not just due to the growth of e-commerce but because the decline in service activity has hit footfall.

Giving her perspective on European capital markets, Penny Hacking of Avison Young London noted that while retail yields had now moved into double figures in some places, prime logistics were starting to assume the position prime retail had once held, with assets in the Dutch Randstadt, for example, selling at below 4%.
Meanwhile, signs are that Asia-Pacific office markets may not be seeing as much structural change as other regions, according to James Shepherd of Cushman & Wakefield Shanghai, since working from home has proved less widespread here than in other regions.

Tim Horsey