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Impact of COVID-19 on real estate market

real estate, covid-19

One of the markets that was negatively affected by the COVID-19 pandemic is the real estate market. When we talk about real estate, we do not mean only the housing market, but also offices, industrial-logistics, retail and accommodation markets.

Housing market

Predicting the development of this sector is more complex than it seems at first glance, as it is affected by economic development, both by the business sector and by the labor market with employees. Possible scenarios should therefore be seen as a set of possible future conditions, the development of which will depend on many factors.
For the housing sector, it is realistic to expect an increase in acquisitions of housing in suburban areas. The isolation of urban conglomerations on one hand provides greater comfort and a diversity of services offered, but on the other hand contributes to a higher risk of infection, as exemplified by the highest concentration of positive COVID-19 patients in the cities. This fact is likely to make a significant contribution to the demand for healthier “safer” housing.

Office market

The concentration of a larger number of employees in terms of potential health risk will affect the office market the most. Increased isolation among people will lead to a decrease in demand and, consequently, in the prices of office space, whether from the point of view of buyers or corporate tenants. Gradually, there will be a boom in “home office”, which will make the premises less attractive and their owners will be forced to change the nature of their use, which will lead to their reclassification. This will affect the lately so popular large open-space office premises the most.

Logistics market

Logistics markets have experienced significant global outages, resulting in a decline in flexibility, primarily in supply chains. However, the recovery of this sector will probably be most visible, due to the impact and expansion of automation. Automation, which is part of the progress of digitization, will reduce the demand for human labor, thus eliminating the possible risk of a possible surge in the next wave of the epidemic, but on the down side that will negatively affect the labor market.

Retail sector market

The retail sector is the largest market in terms of employment. Limited liquidity caused by loss of sales will lead to a significant losses of this market. On the other hand, there is a high potential for interconnection with large chains, where there is a high expectation of long-term growth, due to increased flexibility through online sales.
The hotel industry suffered the most from the entire market. But this is a short-term slump, the recovery of which will be the most dynamic. Restrictions on cross-border travel are slowly being relaxed, but the proportion of visitors as to domestic and foreign tourists will change significantly. Already in Q2 2020, the demand of domestic tourists will increase, as they will prefer destinations available with motor vehicles over destinations accessible by air transport. It is domestic tourists in domestic holiday destinations that will contribute to the significant economic progress in the country.

Conclusion

We will know more about how will the real estate market develop further at the end of this year. But we already know today that the criteria for investing in this market will undergo significant changes. The risk factors will be more focused on taking into account potential vulnerability according to the type of real estate, however other factors are still difficult to specify as of today.

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