Round 5 of our sentiment survey provides some insight into the financial impact Covid-19 is having on Europe’s property business, including real estate values and deal flows.
PropertyEU readers and subscribers have provided fresh data for the impact of the coronavirus crisis upon those in the European real estate industry.
Round 5 of the PropertyEU Market Barometer asked: ‘Seven months into government-led responses to Covid-19, what impact is it having on company revenues?’
Roughly one-third of responses were from investment managers/investors, while 18% were from agents/brokers, 14% from advisors and consultants, 11% from developers, 10% from asset managers, and the remainder from architects, designers, law firms, banking and financial services, and public relations firms.
In response to the first question, 24% said the crisis had led to zero revenue loss, 37% said they had lost 0-20%, 26% said 20-40%, 6% said 40-60%, 5% 60-80%, and 2% cited a 80-100% loss. The survey suggests, therefore, that over half of those involved in European real estate have suffered revenue losses of up to 40%. It seems 1 in 10 have unfortunately been hit even harder, with revenues down by more than 40%.
Valuations
A clear picture has emerged regarding the way the crisis has affected valuations. Impressively for the asset class, 81% of respondents said they had seen no loss in value for logistics assets. Residential property has also remained resilient, with 76% saying they had experienced no value loss.
At the other end of the spectrum, the worst affected sectors seem to be retail and hospitality. Only 8% said they had seen no loss in retail property values, while 48% said values had declined 0-20%, 32% said 20-40%, and 7% said 40-60%.
For hotels, only 4% said they had seen no reduction in value, while 40% said the decline had been 0-20%, 34% 20-40%, 14% 40-60%, and 8% reported a crushing 60-80% value loss.
Offices, the biggest asset class of all, makes for very interesting reading. Some 32% said they had endured no loss of value. However, 51% reported a 0-20% loss in value, and 10% said offices were down 20-40%.
Deal flow
What about deal flow? Answers trended the same as for loss in value with 75% of respondents saying they had not seen less deal volume for logistics and 60% reporting the same for residential. Some 40% said they were seeing a drop in office deals of 20-40%. Nearly 30% said they saw a drop in retail deals of 40-60%. As many as 20% said they had seen hotel deal flow collapse by 80-100%.
Working from home
Work trends were also asked about in Round 5. Asked whether in the future people will work more from home on a fixed basis, 73% said ‘yes’ and 27% ‘no’.
The follow-on question has clear implications for office occupancy trends. Respondents were asked: ‘How big is the impact of working from home on the demand (m2) in the office market?' The answers suggest it could have an impact of up to 20%.
Readers’ questions
As ever, readers’ questions present an interesting picture of what is on the minds of some subscribers. Some reflect the annoyance they feel with the situation. One asked: ‘Why are journalists accepting the official BS regarding Covid? Go and educate yourselves, you have swallowed a pack of lies.’ Another said: ‘Why do analysts out of New York make judgements on European markets?! They are 100% different circumstances. There will never be objective opinions.’
Many others could be summed up as: ‘What is your estimation of the length of time of the crisis?’ Another posed: ‘What likely shift will there be in asset allocation by sector from 2021 onwards including a granular breakdown of alternatives?’
