The epidemic has not changed the real estate market but it has been a great accelerator of existing trends, experts agreed at Real Asset Media’s European Debt Finance & Investment Briefing, which was held online this week.
‘COVID-19 is definitely something that will accelerate a few structural changes that were already emerging before the epidemic,’ said Norbert Kellner, Head of Syndication, Berlin Hyp. ‘What would have happened in two or three years’ time will come a lot earlier’.
The shutdown clearly had a major and immediate impact on Q2, drastically altering the picture after what had been a positive start to the year. But regardless of exactly when the recovery will come, it is already apparent that the epidemic will bring some long-term changes.
One is caution. ‘The need to be cautious and selective will have an impact on next year and beyond’, said Kellner. Being more selective has moved up from being a choice to being a must.
‘The epidemic has accelerated the pre-existing shift to quality assets, good locations, strong tenants and reliable borrowers,’ said Carsten Loll, Partner, Real Estate, Linklaters. ‘The process will create opportunities and we’ll see some interesting changes in the market in the next few months’.
Another trend that was already present but has come to the fore is the shift to more openness and cooperation. ‘Keeping the channels of communication open with our key investors to know what they are thinking and doing is absolutely key,’ said Kellner. ‘Cooperation has emerged as a key trend’.
Another aspect of improved communication is more clarity. A better relationship between debt and equity arose out of the ‘trauma’ of the GFC and the result is that ‘there is better reporting and communication in the market and more openness to collaboration,’ said Emma Huepfl, Managing Director, European Credit Strategies, CBRE Global Investors.
One aspect that has already become clear is that sustainability and related issues have not being moved off the agenda because of the current crisis. Quite the opposite, said Kellner: ‘We embarked on that path a long time ago, but ESG issues have become even more of a focus for us and I believe that more and more players will want to play a part in the ESG space’.
The real estate sector has been behind the curve on ESG issues but it is catching up fast, said Huepfl. ‘Investors want ESG-compliant assets, and we on the credit side try to influence investors’ behaviour by creating and incorporating minimum standards’.
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