Impact of the COVID-19 pandemic on the real estate market
The COVID-19 pandemic has for several months been influencing all aspects of people’s lives. We have prepared for you an analysis of the impacts of the pandemic, focusing on estimates regarding the development of the economy and the impacts of COVID-19 on individual segments of the real estate market.
Making predictions at this time would be a tough nut to crack for many a crystal ball. But as we say, luck favours those who are prepared. The economy will certainly drop significantly this year. It is, however, a positive development that the market has managed to grow significantly between the so-called 1st and 2nd waves and that there is a lot of money on the market. It is estimated that real estate yield in the CR will not grow (with exceptions), for the range between the revenue-earning capacity of state bonds and real estates is sufficient and in fact greater than previously. We do not expect any horrors in real estates. COVID has brought about an acceleration of changes which have been discussed for some time, as well as new opportunities. I am convinced that this will be more of an evolution than a revolution.
In offices, new challenges to face will include, for instance, the old-new phenomenon of home office, flexibility of space for tenants, and the “COVID safety” of buildings, such as ventilation, monitoring, contactless control etc. This will incur expenses, but will bring a qualitative shift with small risk, for the market is dominated by a majority opinion that offices are necessary, for they support the cooperation and creativity of employees. Development will experience a poorer period, for interest in pre-leasing is decreasing and banks will, as in every crisis, be conservative.
Logistics will be the probable victor. It is surfing a wave of very strong demand from the e-commerce sector, which is rapidly growing and which will retain the newly-gained market share. Shopping trends will transform.
Retail, i.e. in the form of shopping centres in large towns, will most certainly be affected. There is here the risk of instability of income, which is why yields have grown/will grow. The question will be government support and the rapidity of anti-COVID measure abolition. Shopping centres will have to offer something more, such as attempting to create a genius loci so as to compete with e-commerce. This will be complicated and costly.
Home is where the heart is – local capital will continue to be dominant. Those who desire a higher yield will have to go outside the main localities and accept a higher risk. The Czech real estate market will be attractive for foreign capital. It offers western parameters and a slightly higher yield.
Reviving the economy will depend on the further development of the pandemic and the forecast will accordingly have to be refined further.