Real estate investment volumes down by thirty to forty percent

Real estate advisor CBRE anticipates a relatively limited contraction in the volume of real estate investment in 2020. The worst effects are expected in the second quarter, with a recovery starting in the third quarter. If we manage to control the spread of coronavirus, that recovery will continue into 2021, says the real estate advisor in its Investment Update. In this extensive analysis, the situation in each real estate sector is explained in some detail.

An initial decline, followed by recovery later this year

‘All in all, we currently expect the total volume of investment to fall by 30% to 40% relative to 2019. In the second quarter in particular, activity has been limited, which accounts for most of this fall. This has been a logical consequence of the initial shock of the crisis and the lockdown measures, but as those measures are relaxed in the Netherlands and throughout Europe, we will see a trend towards recovery in the market, which we hope will have returned to a healthy level by the end of next year,’ says Bart Verhelst, Executive Director at real estate advisor CBRE Netherlands.

Fewer property repossessions expected

‘Broadly speaking, this crisis is having a lighter impact than the credit crisis that began in 2008. There is currently enough capital on the market, so we expect fewer property repossessions due to liquidity problems than we saw then. Travel restrictions as a result of the outbreak are now the main concern. Hotel and retail real estate will be the most affected,’ says Erik Langens, Executive Director at real estate advisor CBRE Netherlands.

Extensive overview of each real estate sector

In this Investment Update, CBRE is publishing a comprehensive overview of the impact of coronavirus on the real estate investment market, the finance market and individual real estate sectors. Not every sector is being impacted equally. The worst effects are being seen mainly in the hotel and retail property market, while investor activity in the housing market remains relatively high.

Highlights for each sector

• Retail real estate: trends that were already in evidence are accelerating significantly. Consumers are shopping more online and fashion stores in secondary locations are experiencing very difficult times. Local shopping centres are performing well, however. Furthermore, the relationship between owners and tenants is changing as a result of the current crisis. And empty retail space offers opportunities for conversion into residential space, office space or care facilities. Read more
• Real estate finance market: after an initial pause in activity, most providers of finance are operating again. However, they are clearly working to reduce their risks. Read more
• Hotels: the hotel sector is being hit the hardest. A slow recovery is expected with an increase in domestic tourism first, and then European tourism. Read more
• Logistics real estate: demand and rent levels are stable for the time being, thanks to the tight market and the growing importance of online sales. Read more
• Healthcare real estate: almost all healthcare institutions expect to see declining revenues in 2020, but major financial problems are not expected given the support being made available by the government and health insurers. The shortage of new residential care locations continues to become more acute, as a result of which the demand for investment objects remains robust. Read more
• Office market: this sector is in better shape than in 2008 and will experience limited impact due to sufficient demand in a tight market. However, the quality of office real estate is becoming increasingly important. For more information, see this press release or read more in this article.
• Residential investments: the housing shortage is still there, irrespective of coronavirus, and homes are still seen as a stable and reliable investment. Demand remains high, although we are very unlikely to see the sale of very large portfolios as we have in recent years. The current situation makes affordable rental objects a promising investment. For more information, see this earlier press release or read more in this article.
• General property investment market: the divergence in pricing expectations between buyers and sellers has increased, which could jeopardize some transactions. The second quarter is expected to be bad: the figures for April already show a fall of 39% compared to last year. Read more