The real estate service provider Savills carried out a survey to record the current mood and development in the global real estate market. A recovery is gradually emerging.
Investors are in a positive mood and report that some real estate markets are recovering
Real estate service provider Savills conducted a survey of its research experts from 33 countries from June 3 to 5, 2020. According to the survey results, the mood of investors is quite positive; in around 30 percent of the markets surveyed, user demand for the lifting of the corona lockdown increased. This is a sign that the real estate market is recovering from the corona-related lockdown activities. Positive developments can be seen in the Asian market in particular: two thirds of the markets that saw increasing demand are in the Asia-Pacific region.
The survey also found that investors are making positive forecasts for logistics properties in particular. Just like real estate in the health sector, residential real estate is resistant, according to the respondents. The office real estate industry suffered a sharp decline, with transaction volumes falling in 88 percent of the real estate markets examined by Savills in the first half of 2020.
Financing conditions are becoming stricter
The real estate market is therefore slowly recovering, but according to the Savills survey, this cannot be said about the financing conditions either. Three quarters of the respondents in the United States and the United Arab Emirates reported stricter credit terms and conditions than before the corona pandemic. In Asia, it was comparatively only 38 percent who reported poorer financing options. In Europe, on the other hand, the stricter financing regulations were particularly evident in core office properties, where interest rates doubled during the pandemic.
This could also be due to the decline in private investment below $ 20 million. Because while institutional investors could see the current market as an opportunity because they are less exposed to competition, smaller private investors in particular can shy away from the difficult financing conditions, Savills reports. Oli Fraser Looen, Co-Head Regional Investment Advisory EMEA confirms: “However, since there is almost no equity shortage worldwide, this should not be a major hurdle for institutional investors. Some players may see the situation as a buying opportunity to position themselves in a less competitive environment and to acquire core assets. ”
Logistics and healthcare properties are resilient
Investors are largely positive about their forecasts for the second half of 2020 and 2021, especially for logistics properties, 79 percent of the survey participants expect transaction volumes to increase in the second half of 2020 – according to investors, this is a multi-year trend that will continue. This is due to the fact that there is great interest from investors and at the same time there is little vacancy. As a result, an increase in capital values is also expected. Rental expectations for health and residential properties are similarly positive. Most investors forecast that rents will remain the same or will only decrease slightly. According to three quarters of the respondents, transaction volumes are expected to go up again by 2021 at the latest.
Relaxation is emerging on the office property market
The majority of Savills employees in office properties are also looking positively into the next half year, half assume that sales of office properties will gradually recover, only a fifth estimate that sales will continue to decline in the second half of the year. However, half of the survey participants also assume that the capital values for office properties will remain stable in the next six months, while falling capital values are predicted in around 40 percent of all markets.
The forecasts for the next year and a half
“Transaction volumes are expected to start increasing in the second half of 2020 before more sustainable growth begins in 2021, but the pace and shape of the recovery will vary from country to country. Many buyers expect price reductions of between 5% and 10% due to the COVID-19 crisis, and conversely only a few sellers are forced to sell and redistribute capital. Therefore, the future investment volume will depend on the alignment of buyers ‘and sellers’ expectations, ”says Paul Tostevin, Director World Research at Savills.
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Fraser Looen also predicts: “Nobody plays with the idea that 2020 will be a record year of investment. However, we should expect incredible activity in the fourth quarter. There will undoubtedly be an escape towards the core segment, but the other important trend that will have an equally big impact for us until 2021 and beyond is the price expectation of buyers under the given market conditions. The key question will be: Do the sellers accept the buyer’s view or do they hope for a market development in their favor? ”
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