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The coronavirus outbreak has negatively affected the commercial real estate market in Europe. Transaction volumes in Q2 2020 fell by 39%, but the strong fundamentals of the sector will allow it to recover already in the second half of the year. It will take time for investments to return to pre-pandemic levels. It will take Europe two years and Poland half a year less – according to the CBRE report “Real Estate Market Mid-Year Outlook 2020”. The company’s experts indicate that currently there is a lot of frozen capital on the market, which investors will start spending soon. The best office and logistics space will be the first choice.
– The previous year was record-breaking on the commercial real estate market. The value of investments in our country exceeded EUR 7.7bn, which means an increase by almost EUR 3 billion compared to the result from two years ago. However, the growth cycle was sharply halted by the coronavirus pandemic. Nevertheless, the persistent environment of low interest rates with a lot of capital that investors have frozen amid market uncertainty means that commercial properties are well prepared for a rebound. Especially since some sectors turned out to be very resistant to crisis conditions. Especially offices in the best locations and warehouses in the coronavirus are doing great – says Daniel Bienias, managing director of CBRE.
Rebound in the second half of the year, but it takes time to get back to normal
CBRE experts expect an economic rebound already in the second half of this year. Despite this, the effects of the epidemic left such a strong mark in the first half of the year that we will end the entire 2020 with declines. Economic analyzes show that the GDP of the euro area will contract by 8.3% in 2020. The result for Poland, although negative, is much better and amounts to -3.8%, which puts our country in the best position in Europe. Thanks to this, Poland has a chance to return to the state before the epidemic faster – in about one and a half years, while it will take Europe two years.
– Persistently low interest rates are a good harbinger for the real estate and investment market in Europe. It should be expected that until 2023 central banks will keep their policy of low rates, which should drive investors’ decisions, says Daniel Bienias from CBRE.
Offices equipped with modern technology are on top
Tenants all over Europe are already turning their eyes to ‘intelligent’ office spaces equipped with technology. Both the most technologically advanced buildings and the older ones with the potential for development and renovation are popular. CBRE expects the temporary COVID-19 induced mass remote work experiment to accelerate the trend of flexible working strategies, but not lead to a move away from office spaces. High-quality, amenities-rich buildings in the city center will become even more an element of building a brand image, but also a tool in the war for talents and employee retention. The best prime office space will gain in importance, which will deepen the price differences between them and those in less attractive locations.
Logistics won over the coronavirus
Logistics has proved to be particularly resistant to the coronavirus crisis. The e-commerce sector is growing, and thus the demand for warehouses. The annual growth forecast for rents in prime locations remains positive for all logistics locations, with continued upward pressure in markets with serious restrictions on land availability, such as Warsaw. CBRE expects that strong tenant demand will continue to attract considerable investor interest – some will increase their logistics assets and others will enter the sector for the first time.