Global capital markets have borne the immediate impact of the outbreak of Covid-19, with transaction volumes down across 62% of all real estate sectors.
Retail activity was the hardest hit, with 82% of the 24 counties surveyed by Savills in its latest sentiment survey, including the UK, Hong Kong and the US, reporting a drop in activity. Demand from retail occupiers was also reported to have fallen by 74% of countries, which has seen rental values slip in 30% of the countries surveyed.
Hotel transaction volumes were also down by according to 84% of the countries surveyed, and occupier demand down by 95% as international travel and domestic lockdowns prevent visits, Savills said. Rental values for the hotels sector have therefore fallen across 63% of the countries surveyed.
Savills reported that pricing for property remained firm in 51% of all sectors globally, with 57% of markets reporting no change or rises in transaction activity for logistics real estate.
In the office market, 45% of countries reported a moderate fall in transactions, while 70% of countries surveyed reported a moderate fall in demand for office space from occupiers and 13% reported a sharp fall in demand.
This impact from the change in demand has not yet been fully realised in rental values, with 51% of countries and sectors reporting no changes.
Paul Tostevin, director in Savills’ world research team, said: “In the short term we expect to see capital values and rents follow the falls seen in transaction activity and occupier demand. Covid-19 remains a near-term challenge, but certain trends, such as the shift to online retail and changing working habits, may be accelerated. This could have long-term implications for markets as a whole.”
Mat Oakley, head of UK and European commercial research at Savills, added: “In the UK and Europe our experience so far is that under-offer deals have proceeded, but most new deals are unlikely to be able to enter the pipeline for several months to come. In terms of buyers, core investors will remain motivated and there’s likely to be a surge in demand from opportunistic investors. With all but essential development grinding to a halt, there’s likely to be a future shortage of supply.
“In the occupier markets most exposed are ‘by the hour businesses’ such as airlines and hotels, followed by those who lease by the month – retail and serviced offices. Longer leased assets will be relatively resilient – unless they are exposed to operators of the above and then they will be challenged.”
To send feedback, e-mail louise.dransfield@egi.co.uk or tweet @DransfieldL or @estatesgazette
