Covid

UNDERSTANDING THE SECTOR IMPACT OF COVID-19 IN THE REAL ESTATE MARKET

As the effects of COVID-19 are felt around the world, real estate companies are being impacted in many different ways, depending on region and asset class.  In the near term, executives are concerned with preserving value and liquidity, keeping tenants and visitors safe, complying with governmental agency requirements.  In addition, tenants may be faced with liquidity pressures that result in deferring or ceasing contractual lease payments.  Certain subsectors, such as hospitality, retail and developers will face more immediate impacts while other subsectors, such as multifamily and non-traditional owners will likely feel less immediate impact.  Longer term, subsectors such as office and industrial could be impacted by changes in where people work and changes in supply chain. 

KEY QUESTIONS BEING ASKED

• Will this accelerate a change in the way people live and work and use real estate?
• What will impact be on the valuation of assets?
• What impact will this have on pending acquisitions, dispositions, development and capital spend?
• What will be the impact of investment capital and where will it focus (opportunistic, sourcing?)
• How will this impact liquidity and debt covenants for owners and occupiers?
• What investment in building technologies will occur for sustainability, safety and remote collaboration?

PRACTICAL NEXT STEPS

Real estate leaders will be defined by what they do along the three dimensions to managing a crisis: respond, recover, and thrive.  Items top-of-mind include:

• Prioritising safety and wellbeing of people and tenants
• Short-term liquidity needs
• Remote working considerations, including: location and access to information/data, financial reporting processes and internal controls, and cyber/IT infrastructure constraints

Article supplied by Deloitte and Touch, Kathy Feucht, Global Real Estate Leader