Covid and real estate: a hard-hit sector that manages to resist
There’s no denying that the pandemic has turned our daily lives upside down – for French people and businesses alike. As elsewhere, Covid and real estate don’t mix. The economic slowdown and lockdowns have taken their toll on several segments of the real estate sector: the new-build market is bracing itself for a shortage of properties to market, telecommuting is threatening office rentals, and commercial real estate is facing an unprecedented drop in demand.
However, with the arrival of vaccines, the French are finally seeing the light at the end of the tunnel, and their confidence in real estate remains intact. To overcome the crisis and maintain their business, professionals are putting all their faith in digital.
Covid and real estate: here are the 6 real estate market trends for 2021.
#1. Crisis in new housing forecast
With the postponement of the municipal elections, real estate projects have been significantly delayed, postponing their start-up. And this at a time when the supply of new homes was already insufficient to meet demand.
The year 2020 was marked by a 15% reduction in the number of building permits issued. And this despite the fact that “more than two million [additional inhabitants] are expected over the next fifteen years. Add to that an aging housing stock, and we need housing,” laments Nordine Hachemi, CEO of Kaufman & Broad.
#2. Covid and real estate: offices take the hit
crisis in the office sector – covid and real estate – 3D rendering of office furniture
Office real estate is the big loser in this health crisis. Between confinements and the development of a strong telecommuting trend, the indicators are in the red:
- Vacancy rate up 5.9% in Europe’s 15 major markets,
- Falling demand: -46% in Paris, -48% in London (Central London), -34% for Germany’s Big Four…
- 83% of French people are calling for the development of teleworking, and only 38% wish to return to the pre-confinement face-to-face rhythm.
This trend is likely to continue, at least in the short term. To reconcile this crisis in Covid and real estate, it may be necessary to change the vocation of certain projects, where possible, towards residential projects. Some advocate thinking up new uses for these spaces, making them more user-friendly and modular.
#3. Commercial real estate: demand in free fall
With a 45% drop in the volume of investment in commercial real estate, the tone is set. The crisis of confidence is glaringly obvious among investors. On the tenant side, retailers are facing competition from e-commerce, a trend that was already apparent before the crisis.
To revive their businesses, retailers will need to invest heavily in e-commerce, and implement cross-channel strategies such as click-and-collect to keep customers coming back for more.
#4. The rise of e-commerce boosts demand for industrial premises
Herein lies the paradox. The collapse in “physical” sales has been offset by an increase in e-commerce sales. As a result, demand for industrial premises to store goods has risen accordingly.
On the other hand, Covid demonstrated the importance of certain industrial activities, notably pharmaceuticals, being present on French soil. The impact of Covid and real estate can therefore be seen in the relocation of certain industries to France.
#5. Covid and real estate: stone remains a safe bet
The prophets of doom seem to be wrong: real estate prices will not plunge by 20%, as Marc Touati predicted in September 2020. One year after the start of the crisis, prices are holding up well overall, and buyer morale is high. According to a SeLoger survey, 54% of future buyers believe that real estate remains a safe investment.
Confidence is also high on the seller’s side: 60% hope to see their project come to fruition. With Covid and real estate, it’s the price trend that seems uncertain: 38% even imagine that real estate prices will rise in the near future, against 27% who believe they will fall.
#6. Covid and real estate: digital to the rescue of professionals
To support the marketing and promotion of their properties, professionals are increasingly turning to digital technology. Covid and real estate have made it possible to develop increasingly realistic tools, such as 3D animations, virtual visits and 360° renderings.
Thanks to this 3D visualization process, real estate agents can offer their prospects an unparalleled experience. From now on, people can visit their future home from home, at any time. And they can do so even before the property is actually built! So there’s no need to drive around, waste time and risk getting infected. In this sense, the effect of Covid-19 on the real estate market will have pushed the sector towards a necessary innovation. Without a doubt, the trend towards digital marketing tools is here to stay – a trend also observed in the furniture sector.
