There is no question that the real estate industry has been impacted by the covid-19 pandemic, albeit differently ac-cording to the sector and the market. I believe real estate was relatively less impacted by the pandemic in comparison to other industries. Below I expand on some of the consequences the pandemic has prompted in our industry.
With countries issuing travel bans during the last year and people staying at home to reduce the spread of the virus, tourism and travel experienced a significant drop, thus making the hospitality the hardest-hit sector, with effects on hotels, restaurants, bars, short-term apartment rentals, among others. As a result, we witnessed a rise of domestic tourism with people traveling within their respective countries instead of flying overseas for holiday. International travel is starting to resume lately in some parts of the world, nevertheless the activity will take fews years to get back gradually to the normal status that we used to know.
Retail and commercial real estate follow hospitality in the list of most affected sectors. When it comes to retail markets, apart from businesses selling essential items such as grocery stores and pharmacies, physical stores selling non-essential goods especially in prime locations with high rentals suffered the most, facing a shortfall in sales both now and in the long-term because of the subsequent economic crisis. On the other hand, online retail has grown exponentially, which in turn is helping the logistics industry to catch-up. New models are emerging and opportunities are presenting themselves, in particular for traditional offline businesses which are shifting online. During this crisis, consumers shifted to online in virtue of its speed and efficiency and we witnessed the growth and emergence of various applications, leading to a normalization of this new way of buying. Regardless of the commercial activity, communication between landlords and tenants is now more important than ever. They must stand together and prioritize survival over profit even after a year from the start of this pandemic. As for agricultural real estate, this segment of the market is more and more demanded as countries want to augment their domestic production trying to become less dependent on imports.
With respect to the residential sector – It displayed some level of resilience in comparison to other real estate segments. We have noticed a high number of transactions globally with an increase of the prices in some countries like the United States due to the low inventory in the market.
In fact, it is likely that we will see an emergence of affordable, low-cost housing developments and increasing support from governments in regards to creating new regulations following the pressure of an impending economic crisis in some countries .
The second homes segment, on the other hand, was more affected given its link to the tourism sector but a lot of those properties sold previously to foreigners were purchased by locals that needed to get out of the city or find a local spot for their vacations.
With reference to office markets, as most of us were forced to stay at home and face-to-face meetings were curtailed, people turned to digital platforms in order to continue holding such meetings, conducting training and coordinating work. Companies have noticed that remote working is a viable long-term option, as the cost with transportation, rents, food, among others, is significantly reduced. Indeed, it is relatively changing working behavior with a higher demand for remote work and collaboration technologies. Nevertheless, such practices are unlikely to pose a total threat to office demand. Notwithstanding the fact the covid-19 have hit the co-working sector considerably, it could also witness a higher demand in the future when facilities reopen but, similarly to co-living, will only survive if it adapts to the new reality. Spatial design plays an important role in the success of co-working, as well as sanitation and hygiene measures.
Make no mistake: the way we design cities will change. A new wave of urban planning will emerge, particularly in dense cities such as New York or London and Paris. The coronavirus outbreak has rapidly changed the way we live, work, and play. Taking into consideration the fact that we spend 90% of our time indoors, whether in schools, offices or apartment buildings, it goes without saying that the real estate industry plays a pivotal role in creating safe environments, and thus can help control the transmission of COVID-19 as well as help prevent future outbreaks. As the link between our health and our environment becomes more and more evident, we are observing an increased focus on healthy buildings, from heating to ventilation systems, as well as an upward trend when it comes to suburban housing markets.
The long-term effects of this pandemic are difficult to foresee given the volatility of the situation at all levels worldwide. A new paradigm may be on the horizon, following a rethink of the way we live and work, and giving way to new operational models.
Some things are certain: adaptation is the key and crises generate opportunities. No matter the challenges COVID-19 poses to real estate, what will define the impact the current situation will have in our lives is our capability to continue adapting quickly and to turn crisis into opportunities. In fact, this could well be the best time to invest in the affected segments of real estate: after all as Maron Rothschild said in the 18th century “the time to buy is when there is blood in the streets”.