Webinar, Panel
The Impact of COVID-19 on Real Estate Investment - Conference Call Series
Milken InstitutePeggy Sito, Hugh Andrew, Stuart Crow, Kenneth Gaw, Abhinav Ram Reddy, Laura DeLacy, Kenny Goh, Abhinav Reddy
- Investors are currently adopting defensive portfolio strategies with strong liquidity and waiting for better entry points, anticipating a return to strong trading activity toward the latter part of the year as uncertainty persists.
- Market recovery timelines are projected to range from six to nine months following a three-month shutdown, and up to 12 to 18 months if closures extend to six months, with a consensus that a sharp rebound in trading activity will occur while value recovery may take longer due to cash flow dynamics.
- Real estate asset classes are expected to see divergent performance, with multi-family, logistics, and data centers viewed as defensive, while medical office and health-related sectors are predicted to benefit from the crisis.
- Specific sectors show varied trajectories, including a predicted acceleration and rationalization in co-working and co-living with a shift toward return management contracts, severe disruption in hospitality with closures in North America and Europe, and 20 to 40 percent growth in supermarkets versus struggles for large format restaurants.
- Regional outlooks favor markets with strong domestic liquidity and large internal economies, specifically predicting Japan, Korea, China, and the U.S. will recover first due to reduced reliance on foreign capital or external trade, whereas Vietnam, Japan, and Singapore remain strong investment prospects for at least the next twelve months.
- In the Asia-Pacific region, demand for long-term office space is expected to rise within a year as corporates offshore jobs to cut costs, particularly benefiting core office markets in India which are projected to recover first and remain a focus for the next three to five years.
- Key risks include a potential W-shaped curve if a virus recurrence occurs in November or December, and the possibility that fiscal initiatives designed to reinvigorate economies could reduce available distress opportunities for investors.
- The lending environment is expected to react to the disruption with the majority of the peer group surviving without a completely distressed market, while investors plan to apply a microscope to operations and create value by assessing asset robustness under stress.
- Capital flows are predicted to continue into Japan due to the defensive nature of its currency, and a larger wave of corporate lease-backs has already been observed in the last six to eight weeks.
- Consumer behavior is anticipated to shift toward opportunism, with "revenge spending" already visible in outlet malls in China where trading numbers exceeded pre-crisis projections by 20 percent.