Retail and Logistics Sectors Hardest hit by COVID-19



Cushman & Wakefield is the latest consultancy to confirm that its staff are working remotely and, although it is striving to provide its regular services, meetings and other protocols will need to be modified.

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“With regard to the short-term impacts on economic growth, business activity and individual behavior are undeniable, and while the current consensus is for a rebound in the global economy in the second quarter of 2020, the exact trajectory is unknowable. We therefore suggest a scenario planning approach, rather than betting on any bold predictions,” JLL says regarding the impact of COVID-19 on European markets.

The consultancy argues that investment activity is likely to slow in the first half of 2020 as investors react to uncertainty, with the retail and hospitality sectors being the most affected. A shift to defensive assets is expected.

“The fundamentals of the markets are seen as strong, but COVID-19 has put a halt to the super-cycle in term of development and transactions,” comments Benjamin Perez-Ellischewitz, head of capital markets at JLL Hungary.

“Real estate investment has fluctuated during previous crises, but the long-term trend over time has been for increased allocations to the sector and we see no reason for this to change. Real estate continues to offer attractive relative returns in comparison to other asset classes,” he continues.

Wait and See

“Investment activity will be impacted in 2020 as some investors adopt a wait and see attitude in the coming months while other are simply faced with practical issues on how to progress deals even if they are keen to move forward with acquisitions. Travel bans and the reduction of physical contacts make the organization of viewings and technical due diligence difficult,” Perez-Ellischewitz says.

Kevin Turpin, regional director of CEE research at Colliers International, argues that although it is far too soon to be quoting any figures, first quarter investment volumes in most markets are usually around 20% of annual volumes, with the bulk often coming in the latter stages of the year.

“So, if we were to focus on a best case scenario where the world returns to some kind of stability by mid-year, then we might see investment activity returning strongly in the second half of the year as domestic and international capital looks to find a home. The various CEE governments and central banks obviously play a key role in damage limitation to the many businesses directly or indirectly impacted,” Turpin says.

“As for the real economy and real estate, the full impact of COVID-19 is uncertain, but it is clear that the tourism, retail and leisure sectors will be the most impacted in the short-term,” Colliers notes. With regard to the hotel and hospitality sectors, the impact of travel restrictions, event cancellations and the relicense of individuals to travel have immediately been felt in this sector. Essentially, occupancy will fall.

Rapid Rebound Potential

“Locations with a high proportion of international visitors are most exposed, while locations accessible to a domestic audience by car or public transport may benefit. There is potential for a fairly rapid rebound if the virus is contained in short order,” says JLL.

It is argued that retailers must be prepared to navigate a period of elevated risks to cash flow and increased operational costs arising from a slump in consumer demand and disruption to supply chains.

This latter disruption is seen as the main effect on the industrial and logistics sector. Reduced activity at major gateway ports and airports is resulting in falling utilization rates and idle resources.

“This outbreak may accelerate the use of automation and robots in operations and reduce the reliance of the sector on labor,” JLL concludes.

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