Open-ended real estate funds proved to be extremely resilient in the current crisis. Nevertheless, COVID-19 will have a noticeable impact on the property portfolio.
The past few weeks have been characterized by empty bars, hotels and shopping centers. Many of the operators are now facing major financial problems. Although most of the facilities are now open again, the consequences of the pandemic will continue to be felt for a long time – even among property rental companies.
Rating agency downgrades funds
The rating agency Scope has now reacted to the increased risks and at the same time reduced earnings prospects and downgraded a total of twelve funds, which manage a total of around 100 billion euros.
Unlike during the financial crisis in 2008/09, no fund closings are currently expected. At that time, a total of 18 funds with total assets of EUR 26 billion had to be closed for liquidity reasons. The open-ended real estate funds currently have liquid funds that cover an average of 20 percent of the total fixed assets of the real estate funds.
One reason for the stable situation with real estate funds is the minimum holding period that has been in force since 2013, as well as the changed notice periods.
Different effects on individual property segments
Gastronomy, retail and the hotel and tourism industry in particular are affected by the restrictions caused by the Corona pandemic. An increased number of bankruptcies can be expected here in the next few weeks and months.
According to Scope estimates, the market for office properties will also feel the negative consequences. The rating agency cites possible imminent staff cuts at many companies as well as an increase in working hours in the home office as possible reasons. Scope sees the greatest risks in an increasing vacancy rate for properties in less attractive locations.
Positive future prospects
The rapid price losses on the global stock exchanges have led many investors to say goodbye to equity investments. According to Klaus Niewöhner-Pape, Managing Director at Industria Wohnen, the corona crisis could lead to an increase in the investment volume in real estate, since investors are looking for alternative investments.
The global real estate market remains attractive. grundbesitz global invests worldwide in commercial real estate from the areas of office, logistics and retail. Why this is interesting for private investors.
A precise assessment will, however, only be possible in the next few weeks when the measures decided on have an effect.
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