How does Covid-19 impact the real estate market? (Part 2)

Demand for tenants has changed

Savills experts said that tenants had to significantly adjust their lifestyle and work since the pandemic occurred. Notably, some businesses started showing signs of stability when the epidemic peaked in some countries.

Office demand remains stable in 42% of the country, while the remaining 55% has a moderate drop in demand. Benefiting from the positive growth of the online retail industry, the demand for logistics has not changed or increased moderately in more than 79% of countries. Only in the retail and hospitality sector, demand declined, with a sharp decline in more than half of the countries.

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In China recorded a clear recovery. This is reflected in a moderate increase in retail and office leasing activity in the first half of April 2020. Although China has implemented a social gap, usage rates have increased as more offices and shops have reopened. The hotel industry is also slowly recovering, but the demand is still lower than the level before the epidemic began.

However, as operations were slowly recovering, a number of second outbreaks led China to revert to a blockade in some areas such as Harbin City in Heilongjiang Province.

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Office rental price has not dropped sharply

Rents recorded unchanged across 60% of industries and countries, and increased in 71% of countries for the office sector. Signs of a more pronounced decrease in the hotel and retail sector.

One reason that rents have not dropped sharply is due to the widespread use of tenant support during this time. Retail tenants benefit the most, with 80% of countries reporting rent support. Postponement of service charges and payment structure changes are also common and are being applied in 40% of the countries.

Even in the office market, where rents are largely unaffected, up to 43% of countries report the use of some rental support packages for tenants. Besides, logistics is the least affected and therefore, very little support is applied.

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