Challenging Times Ahead For Global Real Estate Study Finds

Over one third of the world population is in lockdown. That’s more than two billion people experiencing isolation and social distancing measures, while the entire world’s norms are thrown into question due to the Corona virus pandemic.

What this means for each country depends on the specific national measures taken to curb the Corona virus in terms of health care provisions, as well as economic policy.

Given the rate of change since the outbreak of the CO-VID pandemic, the future state of the global economy, or global real estate, can’t be accurately forecast. The best that can be done is to look at those countries whose economies have been exposed to the implications of the virus for longer periods, and project their status onto future outcomes for countries that have been more recently affected.

There are a number of factors at play when trying to predict the future economic outlook, even for experienced agencies such as Malta Sotheby's International Realty.

These include isolation and social distancing policies, the duration of the lockdown period, health regulations and provisions that have been implemented amidst the CO-VID crisis as well as monetary policies that have been put into place since the outbreak.

Temporary Placement of Rules Relating to Real Estate 

Like most structures that are affected by changes in the economy, real estate has been hard hit by the CO-VID pandemic. Some countries have laid down temporary laws to protect tenants, and, in some cases, landlords. For example, some states in the USA, as well as the UK and Italy, have prohibited evictions until the effects of CO-VID are minimized.  In some countries in Europe, mortgage and rent holidays are commonplace while many construction sites have been abandoned until further notice. On the other side of the world in some Asian countries, rental discounts and rebates have been introduced.

Challenges in Global Real Estate

China is generally seen as the benchmark in terms of adapting to the ‘new normal’, as it was the first to be affected by the Corona Virus. One the one hand, China has shown us that despite stringent lockdown rules, it is possible for the virus to re-emerge after restrictions have been lifted.

This makes it difficult to predict how long the virus will threaten our livelihoods. In real estate terms, investors face the challenge of making reasonable valuations in an unpredictable economic climate.

Despite the fact that technology enables people to stay connected and maintain some degree of productivity, investors also face other challenges like setbacks in making transactions, as well as delayed and unpredictable schedules moving forward.

For these reasons, investments in commercial real estate are expected to occur at a slower rate in the foreseeable future.

The Chinese Economy as a Template for Global Trends

While the virus has proven resilient in China, the country has also shown us that it’s economy can whether the storm if the right policies are implemented. Beyond the borders of the Hubei province, where the virus originated, the economy is slowly returning to normal.

About 90% of manufacturing plants have reopened and most shops and restaurants are up and running again, which provides a promising outlook for investors in the long run.

Trends Among Investors

While there has been a surge in investment opportunities in the health sectors, potential investors will be looking out for a few factors when determining whether or not to invest. Essentially, investors want to establish if their potential asset is a risk in the long run.

In order to do this, they need to look at whether their investment offers a stable source of income and also whether it produces services that are critical to revenue and business. Another important factor to consider is the occupation density of the asset in question, and the possibility for contagion.

What this means in practice is that investments like data centers and logistics centers might be favored, while hotels and retail sectors might be a bigger risk in the short-term. Office assets and living sectors that have stronger remaining terms and tenancies that allow for credit will likewise attract more investors than those without.

In short, expect investors to shuffle their priorities according to risk while is there is at least a short-term slump in global real estate.