The impact of COVID-19 on economic and commercial property activity is clearly visible in the data, with GDP dropping by 20% in April and CRE investment activity failing to break through the £1bn mark in both April and May. This does not come as a surprise, given how most parts of the economy were shut for months.
Notwithstanding a second wave in new infections and a resulting re-introduction of stricter lockdown measures as currently experienced in Melbourne, the trough is now behind us and latest figures suggest that momentum is building. “Soft” economic indicators point to a pick-up in activity and commercial property investment volumes are on the up again, with deals worth up to £2.5bn in the making.
Nonetheless, annual all-property returns will fall by 7.1% this year as rental performance and pricing concerns across most asset classes are driving increases in yields. The retail and leisure segments of the market will fare particularly poorly. However, we expect the external shock of the pandemic to be relatively short-lived and the commercial property market to bounce back next year.
