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The crisis that ran out of steam almost before it started


The most short-lived property crisis ever has perhaps ended already. Colliers is already witnessing the active return of most investors to the market contrary to claims by numerous investors that they would bide their time until after the summer holidays. Fewer and fewer investors are in fact in standby position on the sidelines. 

Dramatic start to 2020

The past six months have been one of the most dramatic periods ever for the global economy, for Danish economy and for financial markets both in Denmark and around the world.

At start-2020, the economy and the property market were seemingly in a state of perfect equilibrium: Unemployment rates were low, economic growth momentum fair, inflation low and interest rates exceptionally low. The letting market was characterised by a healthy supply/demand balance, stable or slightly downtrending vacancy rates and stable or slightly uptrending rental prices, while the investment property market saw stable yield requirements and strong investor demand.

Then the coronaepidemic changed from being a distant and isolated Chinese epidemic into a pandemic.

Even fairly widespread epidemics – however serious – normally have limited bearing on financial markets or the property market. However, when the global response is a shutdown of production and social life on a massive scale, the consequences are bound to be highly dramatic. The demand for goods and services plummets, large corporations and entire business sectors lose revenues over night, plunging into liquidity crises that quickly turn into existential crises.

Rapid downturn, rapid upturn 

Activity in the letting and investment markets alike tumbled over night – but saw an almost equally dramatic recovery in the matter of few months.

When businesses shut down offices and employees work from home, when it is impossible to conduct property viewings, when it is impossible to enter or leave Denmark, it should be quite self-evident that few businesses dare make important decisions concerning future headquarters. Similarly, only few investors will invest in properties which have been temporarily vacated by tenants, which they find hard to view or make technical inspections of and where, on top of that, the tenants’ businesses may be hit by serious revenue decline or be forced shut.

Everybody fully understood that the lockdown was a temporary, hopefully short-lived, phenomenon. However, it was difficult to make an overall assessment of the long-term consequences: Would many businesses end up in deep crisis, would many go bankrupt, would unemployment figures soar, would consumers dramatically change their historic spending patterns, would housing prices and consumption drop, would the global economy fall into recession or even depression?

Against the backdrop of by far the most comprehensive fiscal and monetary easing ever recorded, at a rate and on a scale dwarfing post-financial crisis measures, it will by all accounts be possible to avoid a deep economic crisis. In the countries that have reopened, consumer spending has bounced back quickly, with unemployment rates climbing at a much slower pace than feared. Consumers have not reacted with fear and restraint, instead they have rather enjoyed the rediscovered freedom to live, experience and consume.

Exactly like the stock market, the property market has seen a much faster market rebound than envisaged even by most optimists.

Certain letting market recovery – and return of brisk investment market activity 

Mainly companies with a substantial share of exports are likely not out of the woods just yet. Their order books are thinning, many key export markets remain partly shut down and inventories have built up in many places. Even if the demand for commercial space is picking up, only the market for storage and logistics facilities is seeing activity on the scale witnessed before the coronacrisis. Many businesses are still reluctant to make decisions – all other things being equal preferring to put off decisions until later in the year when economic visibility has hopefully improved.

The investment market has been much quicker to react: Two months ago, many investors opted for a standby position on the sidelines, announcing that they would bide their time and hardly make any further property investments until after the summer holidays. A good many of them have already changed their minds and are again active in the market.

When central banks pump out liquidity on the scale recently seen, prices of investment assets will naturally increase. They have therefore fully succeeded in stabilising both financial markets and property markets.

We believe that the lenient monetary and fiscal policies will remain in force for some time to come. On a global level, there will be attempts at stimulating consumption, with central banks holding out prospects of a prolonged period of very low interest rates. Over the next 12-24 months, we will see an upturn, albeit not necessarily in the sense that general economic activity will quickly return to pre-coronacrisis-levels. However, at the same time it is by no means unfeasible that investment assets and not least investment properties may see uptrending prices. The spread between the income return on investment properties and the prime yield remains historically wide, and it seems fair to assume that an even larger share of long-term institutional and private savings will be funnelled into the property market.

There is no way we can know for certain at this point. But there are signs to suggest that the most short-lived property market crisis ever has already ended. Or … perhaps it was not a crisis at all, only a brief and passing shock …?


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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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