The profound social and technological changes accelerated by the COVID-19 pandemic will drive evolution across all sectors for investors and occupiers in Europe, potentially propelling shifts in valuation methodology in some sectors.
That’s according to “A Brave New World: The Outlook for Commercial Real Estate in Europe in 2021,” a new paper by Hugo Raworth, SitusAMC Managing Director in London. Click here to access the paper.
Raworth recaps the pandemic’s effect on commercial real estate across Europe, provides an outlook for the immediate aftermath in 2021, and examines longer-term implications. “There are significant economic risks longer term, but thanks to unprecedented government financial support, the impact of COVID-19 on real estate has not been severe as expected,” he noted.
Among the highlights of the paper:
- The pandemic pressed the fast-forward button on transformation already manifest across the market before 2020. Enforced isolation increased our dependence on technology, driving change in the real estate market.
- Values continue to move across some sectors in the UK, but comparing investment yields from March 2020 to March 2021, the shift is surprisingly limited.
- Lenders, for the most part, remained sympathetic to struggling borrowers where there is a convincing case for strong recovery post-pandemic.
- Debt funds filled the gap left by many traditional senior lenders in 2020, but competitive pricing is likely to be a challenge issue as core lenders return to the market in 2021.
- Weaning business off extraordinary government benefits will be painful, leading to varying levels of corporate distress, inevitably impacting real estate occupancy, rents and values.
The paper examines the outlook for office, retail, industrial and alternative sectors, and looks at other factors, such as environmental strategies and legislation, that could affect commercial real estate demand and values across Europe. You can access a copy of the report “A Brave New World: The Outlook for Commercial Real Estate in Europe in 2021,” here.