The effect of the corona virus on different asset classes

by Jan van den Hogen

Head of Tenant Relationship Management Logistics Deka Immobilien GmbH

A brief overview and update on how our company, Deka Immobilien, being a global institutional investor, looks at the coronavirus influences in a number of asset classes.

The hotel industry clearly feels the effects in declining overnight stays. The existence of many small and medium-sized businesses in the hotel industry is currently threatened. The past has shown that even financially strong operator chains start trying to renegotiate rents and conditions in times of crisis. On the supply side, the full project pipelines are likely put to the test.

The already battered retail trade continues to come under further pressure: the closure of shops has an immediate effect on sales. Gastronomy and leisure facilities are also particularly affected by declining sales. Supply chain bottlenecks can occur in the still open shops for everyday goods such as supermarkets, drugstores and pharmacies. It is likely landlords will face increased rental claims. Customers will use online purchases even more than before, making it even harder for the traditional retail to survive.

Uncertainty on the office market is disturbing corporate planning, expansion plans are on hold. The crisis is likely to accelerate the structural trend towards home office working again, but this is not a general solution due to the spatial and technical requirements. Currently, suppliers of co-working space are particularly severely affected by the falling demand. The generally weaker demand in the market should lead to rising vacancies and downward pressure on rents. Incentives will become more important.

The logistics industry is likely to benefit more from online trading, but is suffering from the impairment of the supply chains. The global shipping and aviation gateway ports (Rotterdam and Amsterdam) are particularly affected. Just-in-time and just-in-sequence delivery concepts are no longer being uphold due to the crisis. In the long term this could have the effect that the need for storage space increases. For some industries, the space requirement is increasing rapidly in the short term, e.g. for delivery services. On the other hand, the current slumps in industrial production and consumption in the non-food sector are a real burden. This will have an impact on the previously lively project development activities in this market.

Demand on the housing market has traditionally been relatively insensitive to exogenous shocks. In principle, it is supported by factors such as population growth or the need for temporary housing. Demand on the rental apartment market could be affected by rising unemployment and falling incomes.