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CORONA-Impact: Real Estate and M&A Trends

There is currently more than $2 trillion in dry powder available on the global property market, paired with a strong and timely stimulus on the economy from a range of government and a global pre-crisis economic situation that was stronger than the one that set the context of the 2008 Global Financial crisis. The severity of Corona and its impact on the Real Estate world differs widely per asset class, according to major actors of the sector, according to  Nora Creedon from Goldman Sachs

CORONA-Impact: Residential sector stands to benefit from governments ordering people to stay put

With the residential sector and home-working model benefitting from the global pandemic, development projects are increasingly emerging as a credible investment opportunity. In fact, some segments within the real estate space may come out of this pandemic stronger and bolder.

Ever since the notorious Corona virus has started to impact our lives, home owners have moved to ask for mortgage relief. This has led to property owners in the UK, Italy, Spain and the Nordic region being granted so-called mortgage holidays, ranging from between three to 18 months of suspended payments. Meanwhile, tenants and retailers are also demanding rent suspensions. There is no doubt COVID-19 is severely disrupting the property market, with established revenue streams coming to an abrupt halt.

CORONA-Impact: Freelancing, Remote Working, and Office Real Estate

While some professionals in the gig economy are reaping windfalls amidst the COVID-19 pandemic, others are at its receiving end. Freelancers, remote workers, and personnel on contract comprise the gig economy. People working for food, groceries, and medicines delivery companies and those who can work from home have largely benefited. Uber and Lyft drivers, wedding service freelancers, dog walkers, and caregivers are losing out. Employers will continue to have more freelancers in their team even after the stay at home mandates expire because of the flexibility and cost benefit they offer, according to Marlon Litz-Rosenzweig, CEO and co-founder of WorkGenius, an internet-based freelance recruitment platform. This may be why Mastercard and Kaiser Associates expect the gig economy to expand to $455 billion by 2023 from $204 billion in 2018. AskWonder estimates the total addressable market of the gig economy at $1.5 trillion. Ride sharing companies, Uber and Lyft are losing stock value while food delivery gig company Grubhub has witnessed stock value appreciation. 

CORONA Impact: E-grocers & Dataservices reach new heights but labor shortage and social distancing already cost productivity

ReportLinker lowered by 10-15% the estimated market size of the global logistics and transport industry for 2021 after considering the impact of the COVID-19 pandemic, namely the scarcity of labour and coronavirus testing kits. Unlike the 2008 global economic crisis which lowered demand, the COVID-19 pandemic has dealt a supply shock to international markets. Asia Pacific will command the largest chunk of the market. FMCG will be the most transported commodity

Transport in general and last mile logistics in particular face workforce shortage, while capacity issues plague the global air cargo and maritime transport segments. More globalized than before, manufacturing is unable to source raw materials and dispatch finished goods. E-grocers and online retailers have witnessed an order surge while those transporting non-essentials are losing out. Walmart stock prices show an upward trend since March 2020. DHL stock tanked from January before picking up slightly since March 2020. Geographical proximity to end user and shortening of supply chains can influence decisions related to real estate and M&As. 

CORONA-Impact: For healthcare, Remote consultation rising needs may open major facilities evolutions still to conceive

“Virus resistant,” is how Millionacres described healthcare REITs (Real Estate Investment Trusts); CNN named them “a coronavirus safe haven.” Conventionally, healthcare real estate is recession proof. For various reasons, life-sciences real estate space has emerged as a focal point in dealing with the immediate and long term fallouts of the pandemic. Five segments of the healthcare REITs are Hospital, Senior Housing, Medical Office, Skilled Nursing, and Research/Lab. No segment is a clear winner at present. Most hold good future prospects. Senior Housing is the worst hit. Neither is Skilled Nursing performing any better.

Hospitals are walking a tightrope with escalating expenses eating up expanded revenues. Medical Offices look good for the future with hospitals seeking to outsource routine consultations. Greater research requirements will propel the demand for the Research Labs subsector. CFRA Research Analyst Kenneth Leon recommends Healthcare Trust of America, Alexandria Realty, and Medical Properties Trust as fine investment destinations for they offer a 2.7% to 5% dividend. These are respectively into the Medical Office, Research Lab, and Skilled Nursing segments. Stocks of Welltower INC, a senior housing REIT, slumped in February 2020 from around $90 and are hovering around $50 at present. M&A activity in healthcare real estate will be temporarily suspended. 

CORONA-Impact: Hotel Industry Face New Immediate Unforeseen Challenges

The current coronavirus outbreak has put the global economy under a lockdown reviving the memories of past major crisis such as the last Brexit and the severe worldwide economic crisis of 2007–08. Large economic uncertainties arose and directly affected the Real Estate industry; giving rise to small gains, continued profit decline, lowest acquisition values, etc. The same uncertainties sprang up amid the COVID-19 pandemic, since it has been going worldwide and with its consequences also remaining the same. Some lines of real estate business are more impacted than others, notably the hotel sector where the outbreak's “effects are potentially heavier”. Although it first appears to be a mere public health crisis, most of the measures implemented by governments worldwide began to create a significant gap in the financial sector. Obviously, the global Real Estate business also has a matter for concern and the question is, what are the Real Estate implications?

CORONA-Impact: Student Housing continues to look up

While the short term fallout of the COVID-19 pandemic on Student Housing and Purpose Built Student Accommodation (PBSA) is not very optimistic, strong fundamentals brighten up the long term prospects. Aurelio Di Napoli, Director of Operational Capital Markets at Savills, a property agent, believes investment activity into PBSA will gain momentum in the last two quarters of 2020. Four stakeholders in the segment are housing managers / providers, students, asset owners, and educational institutions. At present, multiple forces are creating revenue issues for universities, housing providers, and investors. But education is a largely recession-proof sector as will be amply clear in a few months from now.  

CORONA-Impact: on Global Capital Markets Bonds and International coordination ease fast recovery

Markets operate on sentiment or expectation or possibility – positive news creates optimism and vice versa. Now, the effect of the COVID-19 pandemic on the actual economy is based on how the pandemic unfolds. Developments in global financial markets, of which capital markets are a part, reflect how international investors price their holdings in response to the spread of the pandemic. February and March 2020 were rather pessimist months for global capital – stock and bond – markets. There was even an inconsistency in March 2020 when bond and stock prices moved in the same directions as opposed to their normally opposite movement. Efforts by central banks of the United States, European Union, china, Japan, Canada and others, such as bond purchases as well as fiscal and monetary measures is having a positive impact on capital markets around the world. 

CORONA-Impact: For Private Equity, history repeats and markets learned from it

Private Equity (PE) is sitting atop $2.5 trillion dry powder in the form of uncalled capital, including $800 billion in buyouts. As valuations fall in the wake of the lockdown, General Partners (GPs) have to channelize these funds. Plus, the companies with dropped valuations have excellent fundamentals. Banks’ reluctant to lend make Private Equity a preferred investor. Legal and valuation uncertainties can slow down the forward march of the Private Equity sector as can inflation-inspired interest rate hikes, falling returns, and the reluctance of Limited Partners (LPs) to allot funds to an already expanding component of their portfolio

CORONA-Impact: Small & Medium Enterprises (SMEs) flexible and resilient, but challenged

With over 400 million Small and Medium Enterprises (SMEs) across the world employing 60-70% of the global workforce, economic recovery is possible only by factoring them in. Many governments have already started acting in this direction in order to prevent fall in employment and incomes. While some of these measures focus on delivering immediate relief, others are long term in nature and direct SMEs towards better integration with the realities of a changed economic-geographical scenario. Considering that the relatively limited resources of SMEs – funds, workforce skills, technology – they are more exposed to the shocks imparted by the COVID-19 pandemic. M&A activity in the SME sector will be on hold as they find their way out of the challenging situation. 

CORONA-Impact: Prudent optimism for Family Offices

CORONA-Impact: Senior Living and Care Facilities

Has the Electric Vehicule Technology come into its own?

At some point, viable innovations gather the momentum necessary to barge in and occupy centre stage. Developments such as semi-autonomous electric trucks and the Clean Vehicle Directive are speeding up the odyssey of the electric vehicle (EV) technology to this critical point at a pace faster than we seem to think.

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