Most investors brace for bad times, but some go bargain hunting

The coronavirus is having a profound impact on the real estate market, but some segments, such as healthcare and logistics, are holding on to their shine. The downturn is weighing heavily on property across the globe but the world's largest investor in real estate, Blackstone, is heading to Europe in search of bargains. Last week, Blackstone Group, finished raising 9.8 billion euros for a fund that will target European real estate. It’s the largest private equity capital raising to be completed since the pandemic’s outbreak, data shows. The move highlights the strategy adopted by investors, like Blackstone, to buy properties despite the increased volatility. Some of the most profitable deals come out of the worst economic conditions. As economists struggle to estimate the magnitude of the fallout from the coronavirus, two-thirds of real estate investors see it as having a moderate impact on the market, according to a sentiment index put together by Savills. In this survey, held in 24 countries, 29 percent of respondents said they see the crisis as having a severe negative impact on real estate. A closer look at the sector also shows that not every segment is reeling from the health crisis. Assets in healthcare and logistics are best withstanding the downturn, as the number of deals being done in hotels and the retail sector plummets. Demand in institutional residential assets (eg. student quarters, seniors housing) also remains intact. "The surge in demand for online retail and the defensive benefits of investing in beds underpin these segments," says Savills in a report. "Retail, already undergoing a structural change, has seen its woes amplified by the virus," it added. Logistics is a "bright spot", the report adds, with 57 percent of the markets surveyed, recording no change in transaction activity. The logistics market, in particular, is benefitting from increased demand from food retailers. Covid-19 remains a challenge, but certain trends, such as the shift to online retail and changing working habits may be accelerated. "This could have long term implications for markets as a whole," Savills concludes.

This article was originally published on on April 13, 2020.


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