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.
On March 17th, around 10% of Parisians fled the French capital city to spend the lockdown period elsewhere in France. Online shopping, remote work and less crowded areas seem to win consumers favor in times of sanitary crisis. Have they passed the point of no return ?
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.
“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.
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?
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.
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.