39% of investors expecting dip in real estate assets

Thirty-nine per cent of investors are expecting commercial real estate assets to fall by between 5 to 10% in value in 2020, according to new research by Duff & Phelps.

The study by the provider of governance, risk and transparency solutions also found that 31% are predicting a fall of 10% or more as a result of the coronavirus pandemic.
 
The survey, conducted by Duff & Phelps’ Real Estate Advisory Group (REAG), quizzed 325 senior directors and investors in real estate and looked into how different sub-sectors across the industry are adjusting to the pandemic, examining the potential shifts in real estate financing.
 
Respondents expected the worst long-term damage in commercial real estate to be among retail and hotels – accounting for 37% and 36% responses respectively – with most investors expecting retail property values to decrease between 10 and 40% over the next 12 months.
 
Thirty-six per cent of investors believed the industrial and logistics sector will emerge the strongest from the crisis.
 
Chairman of the REAG at Duff & Phelps, John Slade, commented: “COVID-19 has had an unprecedented impact on the corporate real estate sector, with lockdowns effectively shutting down entire sectors for months. However, the damage has not been uniform, as some business sectors cannot be taken online as easily as others.

“Nonetheless, some sectors have proved remarkably resilient, particularly prime city centre offices and logistics properties. The value of these assets seems to have been maintained so far.

“If governments decide to shut down world economies, you can expect to see enormous short-term change. But the degree of pessimism among investors is starting to subside, and given the availability of investment capital, I am confident the commercial real estate sector will make a strong recovery.”

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