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Light at the end of the tunnel – or oncoming express train?


In some European countries, including Denmark, the number of coronavirus cases seems to have stabilised, and the question of when and how society is to reopen becomes more and more pressing. Will society return to normal after reopening – or will we see a “new normal” in the property market too?

Everything suggests that Europe, like China, will experience a tentative and gradual reopening of society, starting mid- or end-April and lasting for some months. The second quarter is therefore expected to be characterised by exceptionally low economic activity. In turn, however, most economic observers foresee fairly strong growth momentum in the second half of the year as well as a more normalised market as 2021 wears on.

However, it must not be ignored that substantial risks are looming ahead:

Irrespective of large-scale fiscal and monetary easing, many still question if we as consumers on a global level will resume former consumer patterns. Will a (temporary, at best) surge in unemployment rates put a dampener on our propensity to spend? Will we become wary of travelling, will we increasingly tend to stay at home, and will the reduced level of consumer spending last? We have now for a while tried what it is like not no dine out, not to hit the town, not to buy new clothes, not to buy new cars, etc.

Is the crisis going to change our consumer patterns for good?

Judging by all experience from previous shocks to the economy, ranging from wars and natural disasters over oil crises to terrorist acts, we may as human beings well be more likely to ponder the meaning of life for a while, but we are surprisingly quick to resume previous spending patterns. Once the crisis is over, Colliers believes that we will again travel, dine out, spend and live - more or less like before.

Some patterns will see more long-lived changes; Cruise-ship tourism, for instance, will probably be affected for a longer time than any other type of tourism. No doubt, the crisis will also accelerate developments in the retail industry, in particular in terms of specialty shops, shifting from consumption-driven to experience-driven.

After every crisis there is some talk of a “new normal”. However, in most cases “normal”, when the crisis is completely over, will more often than not be identical with pre-crisis “normal”. 

Today’s property investors are more guarded, but still have an appetite for investments

At the end of March, our German Colliers colleagues conducted research interviews among major German property investors, investors with combined property portfolios worth around EUR 500bn. 

The responses indicated that almost 70% of investors still want to make investments, but that their approach to investments has generally become more cautious. Investors therefore expect to increase their exposure to so-called core investments, i.e. properties offering highly secure cash flows. Surprisingly many also expected to increase their exposure to opportunistic investments, most likely spurred by prospects of declining prices in this particular, fairly high-risk, segment due to stricter loan requirements and higher financing costs.

The survey also indicated that office property remains the most sought-after segment but that investor demand for both residential and logistics property is mounting due to the coronacrisis, whereas it is weakening for hotel and retail property, with grocery shops as the exception.

In view of recent week’s incredibly dramatic financial market fluctuations, it may intuitively make you wonder that property investors are not reacting more vehemently than the survey suggests. Nevertheless, it should not be dismissed that property investments after all carry less risk than other illiquid investment assets, most notably private equity and debt. The cash flows of a property may dry up in the event of vacancy, but the actual building itself still stands. Location qualities will therefore – like during and after all previous crises – become a parameter of utmost importance. 


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Peter Winther

Executive Director | Partner | MRICS


Peter is Executive Director and heads Colliers’ Danish Investment & Capital Markets teams. Peter provides strategic property consultancy services and facilitates the sale of commercial and investment properties, including hotels and shopping centres, as well as property portfolios and companies.

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