Surprising Peak for Investment in Real Estate: A 2020 Review
The EU’s response for tackling the COVID crisis has included a comprehensive approach in all fronts. Not only does it look to stop the virus’ spread, but it also supports businesses and the overall economy. The latter is particularly important for the topic at hand.
The critical hit many countries’ economies has actually come from lockdown measures. Not being able to keep operations has hurt several industries, but real estate has been receiving hits from all fronts.
That’s because many businesses rely on commercial real estate for their operations. As office and retail spaces become less important with lockdowns, the real estate sector loses markets. Thankfully, residential real estate is somewhat of an offset for that.
Closing the Investment Market
Romania’s Business Review recently released an article about real estate investment peaks. Now, that doesn’t mean 2020 hasn’t been a difficult year, far from it. However, 2020 reports have shown surprisingly optimistic results, beating many expectations.
When it comes to commercial real estate investment, we already mentioned how it’s liable to most of the damage from the crisis. That said, reports showed peak investments for this market. The industrial market also performed decently.
However, the most interesting market comes with offices. It experienced around a 40% decrease in rents, yet it has started to show positive signs.
In the end, the investment market for real estate is actually closing with a 40% higher volume than last year, at 900 million euros. The same is true for industrial real estate.
Commercial Real Estate & Online Commerce
One of the most affected markets in the industry was retail commerce. It’s to be expected, too. Lockdowns dictated for stores and other businesses to close down. Thankfully, many companies offset its losses with online commerce.
While it’s definitely an advantage for retail stores, it’s another significant hit for real estate. As online stores become more relevant, the need for commercial spaces will likely decrease. Online commerce is likely to be a long-term integration, so it’s also worth keeping in mind.
However, signs are still quite positive. As these measures protect the labor market, retail spaces are likely to become popular again along with consumption level increases. As vaccination spreads, experts hope that recovery will be noticeable.
The Biggest Hit: Offices
It’s worth noting that remote working has also shown people that it’s not always possible to work from home. Many distractions have driven people tired of working from their home offices, and office retail will definitely benefit from that.
However, we might also spot big changes to the market. Vacancy rates for retail and office real estate will grow, primarily for the latter. Permanent remote work is likely to be the choice for many people, driving companies to reduce their office space investment.
When we mention big changes to the office sector, we need to account for co-working spaces and their rising popularity. Office real estate might need to accommodate these new needs if it wishes to make the most out of COVID’s long-term repercussions.
Commercial Vacancy Rates
Despite promising outlooks, we can’t ignore current events. As we mentioned, commercial real estate will experience growing vacancy levels, even for next year. The main causes for it would be a combination between eCommerce’s popularity and preference for remote work.
Any investor and real estate firm has to keep these issues in mind before they can benefit from the promising predictions. Some industries don’t really benefit from office spaces as others do, and it’s likely that remote shifts will become the norm for many sectors.
Luckily, experts believe that financial growth in most countries while recovering from the pandemic will absorb these vacancies in the long run.
What do we Think?
While the financial impact of COVID on Europe is comparable to some of the worst recessions, financial recovery has been noticeably faster. We can’t deny the upcoming challenges, yet preparing for them is vital to overcome “the worst part.”
In our opinion, the most important skill for investors and companies in commercial real estate is adaptability. Sectors like technologic development and coworking spaces still require installations, and they could pose excellent returns for those investing intelligently.
Knowing what’s coming is the best way to take advantage of any situation. That’s why we invite you to subscribe to our newsletter. We provide all the information you need to make the most out of the real estate industry as COVID settles down and new opportunities arise.