The aftermath of the coronavirus pandemic will impact real estate companies for some time to come – or not? Looking at operating- and financial performance of rated Nordic real estate companies, the impact so far is barely visible. It seems that companies may come out of the pandemic largely unscathed.
We believe, businesses will not go back to the way they operated before. Real Estate companies will use the crisis to reinvent themselves and increase their resilience, adapting their models and operations to the ”new normal”. However, building resilience needs to consist of much more than reopening workspaces and a return to pre-crisis strategies. Rather, companies should prepare for a slow re-entry and a choppy and multi-phased recovery.
For Sweden’s property market, which continues to benefit from healthy transaction volumes and still low though volatile interest rates, the pandemic’s longer impact remains uncertain. The macroeconomic environment weakened significantly in the second quarter of this year, but has undergone a solid recovery since the summer.
The pandemic will produce winners and losers as it affects both demand and supply. It has also raised questions over how we work that are likely to affect demand for offices in future. We expect existing structural shopping trends to gather speed as a result of digitalisation and the rise of e-commerce, among other factors, which is in turn creating tailwinds for logistics assets.
With such factors in play, will the pandemic mark the beginning of the end of the current real estate cycle? And how much time do real estate companies have to prepare for the inevitable cooling of sector conditions?