In its latest global sentiment survey among its researchers around the world of the impact of Covid-19, Savills says that the outlook has improved slightly, with 19% of countries reporting a severe negative impact on their real estate markets due to the pandemic – an improvement compared to 29% in its previous survey.
Sentiment in China is now ”slightly positive”. China has seen some real estate activity resume as infection rates have been brought under control: retail and office leasing activity rose moderately in the first half of April.
Utilisation rates have also increased as more offices and shops are open with people in them, although rates remain below normal levels as social distancing continues. South Korea and Vietnam, also benefitting from rapid decreases in infection levels, both reported ”neutral” market sentiment.
Rents remain unchanged across 60% of sectors and countries globally, rising to 71% of countries in the case of offices, supported in part by the extensive use of concessions.
Retail tenants have been the greatest beneficiaries, with 80% of countries reporting retailers receiving some form of rent relief. Deferred service charges and changes in payment structures are the next most common, with 40% of countries reporting their use by retail landlords in each case.
Occupier demand altered virtually overnight in many markets. But with early indications that many countries are now at the peak of the epidemic, signs of stability can be seen in some sectors.
Demand for offices is reported to be stable in 42% of countries, while 55% reported moderate falls in occupier demand. This is a significant improvement from the 70% that reported moderate falls at the end of March.
The survey indicates that transaction volumes are down but no longer falling as sharply as in March. In the first half of April, 44% of countries noted no change in transaction volumes.
In the office market, nearly half of the countries surveyed reported no change in transaction volumes since the end of March, whereas earlier 73% of countries were reporting moderate or severe declines in volumes.
Capital values continue to be largely unaffected with 63% of countries surveyed reporting values in their markets to be unchanged, albeit on thin volumes.
Unsurprisingly, logistics and healthcare continue to fare well, with 87% and 95% of countries respectively reporting unchanged or increased capital values.
Both sectors will continue to be in high demand for the foreseeable future, which should help support values. Over two-thirds of countries report offices and residential capital values to be unchanged.
Government intervention, such as reduced property taxation or temporary bans on evictions, were reported in 59% of the countries surveyed.