Even though the economic scope of this new scenario is greater than was initially expected, the current situation is very different from the previous economic and financial crisis of 2008. Furthermore, the high amount of capital in the markets, along with particularly expansive policies implemented by the ECB, lead us to believe that recovery will be much quicker than in the previous recession.
Despite great uncertainty concerning the final outcome, recovery will depend largely on how soon the containment measures are lifted and consumer confidence is restored.
Following the initial weeks of shock after the outbreak of the pandemic, an asymmetric impact is evident in Spanish real estate, depending on the typology of assets and their degree of exposure to the pandemic.
This new scenario has accelerated the trends that had been observed in recent months in some sectors. For example, the rapid implementation of teleworking driven by confinement, or the increase in e-commerce, are directly affecting the transformation of the office sector, the logistics market and housing.
In the office market, the substantial rise in unemployment makes it likely that demand will be much more contained in upcoming months. Furthermore, the rapid implementation of teleworking is leading companies to reformulate their occupier strategies, analysing what their needs will be in light of new requirements and business models. This will imply a different kind of space because, after analysing how teleworking was managed during the last six months, it became clear that the physical office continues essential to create a culture and sense of belonging in companies.
It is evident that the sectors least impacted by the pandemic are the residential rental segment and logistics. The boom in e-commerce, which accelerated with the arrival of the pandemic, generated an increase in demand for logistics platforms from firms associated with online commerce and the food sector. This has made logistics one of the favourite asset classes among investors at the moment, driven by the increase in demand, the growth potential of e-commerce and the attractive yields offered by this sector.
The residential rental sector, especially in the Build to Rent typology, has been displaying exponential growth in recent years, and has not lost momentum since the outbreak of the pandemic. There is great interest in this product from investment funds, who are attracted by the potential growth in demand and the lack of professionalised product.
The retail sector, which was already showing some deceleration before the onset of COVID-19 is, along with the hotel market, one of the most exposed to the pandemic. The lockdown of retail establishments, as well as borders, cities, neighbourhoods and districts, is reflected in a steep decline in footfall and sales. There is clear polarisation in the retail sector, and the gap between prime centres and the rest is widening. In capital markets, there is great activity in the food sector which, so far, has led retail to concentrate a great part of the volume traded in 2020.
We are also witnessing the consolidation of alternative markets, especially in the senior living and student residence segments which, despite the implementation of health measures, have remained attractive.
The closing of borders and establishments also made the hotel industry one of the most affected sectors. Nonetheless, the principal market players consider this a temporary situation and remain focused on the sector. Therefore, dynamic investment activity is expected in 2021, due to the need to divest assets to generate liquidity.
We are also observing a faster recovery in the vacation market, to the detriment of the urban business market, where the implementation of technology may replace some overnights. Nonetheless, the duration of the pandemic and the resilience of the financial sector will determine this segment’s evolution.
From a financing perspective, before the arrival of the pandemic, banking entities were willing to finance operations for all types of assets, while now, they are more reluctant to provide funding for assets that are highly exposed to this crisis, principally hotels and shopping centres. Furthermore, there has been a decrease in the percentage of financing provided in operations, with levels up to 50%-55% and increases in interest rates.