A special report by the German Investment Real Estate Association has highlighted the winners and losers of the corona crisis within the real estate industry. While residential property represents stability, hotel property is particularly hard hit by the pandemic.
The Corona crisis and the real estate sector
The corona pandemic has severely impacted most sectors of the economy, with financial markets slumping in places. Contrary to the crisis, however, various real estate classes are presenting themselves. In the medium or long term, some real estate investments will emerge as profiteers from the Corona crisis. This is the result of a special report by the experts from the German Investment Real Estate Association (DAVE).
All sectors profited from the constant real estate boom and then came the crisis caused by the corona virus. For the first time in many years, price increases in the real estate industry have stagnated, hotel properties are particularly hard hit, but rents for office and retail space are also at risk due to the pandemic.
However, the pandemic has also made some sectors emerge as winners, while other investments are relatively unchanged. In this regard, the experts from DAVE have published forecasts for the individual asset classes within the industry.
Contradicting the pandemic
In general, the experts speak in the special report of a probable scenario in which property prices will rise again in the medium to long term. For the third quarter of 2020, growth is already expected for the real estate industry.
Managing Director Peter Schürrer predicts, “The faster we gradually loosen the lockdown, the economic consequences for both companies and private households will remain manageable in the vast majority. And as a result, this would also be the case with the real estate market ”.
Since the real estate boom in Germany did not arise artificially, but is based on economic principles, the real estate industry is crisis-proof, says Matthias Wirtz, Head of Research at KSK-Immobilien, in the report. “Because there was never a bubble, nothing can burst,” comments Wirtz.
The winners and losers
According to DAVE, investments in owner-occupied residential properties will not experience any growth in the short term, but will increase again in the long term. Even if demand in this sector will decline in the short term due to the crisis, there will still be more needs in the future than can be met by the supply.
The same applies to rental properties: Even if the risk of loss of rent may increase in the short term, prices will grow again in the long term. Because, as with owner-occupied residential properties, demand for rental properties will continue to exceed supply.
The situation is different with retail real estate, this asset class is on the descending branch due to the Corona crisis. In particular, properties in “prime locations” will have to reckon with price drops in the long term, the experts say.
Whereas office properties defy the crisis for the most part, although certain losses are also to be expected here, depending on the tenant, but overall the experts predict a constant price trend, meaning hardly any consequences due to the crisis.
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However, the tourism industry is one of the big losers in the pandemic, and hotel properties are correspondingly negative. Here the experts predict long-term negative consequences. “The tourism industry will need the longest to recover from the crisis,” is the expert opinion.
Special properties in the form of daycare centers and social properties are named as big winners within the real estate industry. Here the analysts see future-proof investments that embody increasing relevance both before and after the crisis. The DAVE report speaks of long-term high potential.
But logistics properties are emerging as the direct winners of the crisis. Due to increasing online trade and the greater need for large distribution centers, investors in this sector can expect short-term and long-term growth, according to DAVE.
The contribution DAVE special report determines crisis winners and losers first appeared on investments in real estate.