Real Estate Investor Survey: Retail sector will be hurt most by COVID-19

Nine out of 10 investors and senior property company directors think real estate transaction levels will return to pre-pandemic levels in 2021, though the same number foresee the retail and hospitality sectors struggling the hardest to work their ways back.

Nearly half of the United States investors surveyed by Duff & Phelps foresaw a 5-10% decrease in real estate value at year’s end, though more than a third predicted the pandemic would be a boon to the industrial and logistics sectors. With other surveys predicting a 30% increase in online shopping this holiday season, demand for fulfillment centers is high, and some are seen to be headed into empty mall anchor space.

“Retail properties that have reopened have seen mixed results with some in premium locales faring well and others in secondary locations doing poorly due to ongoing restrictions on capacity and lack of foot traffic,” said Ross Prindle, global head of the Real Estate Advisory Group at Duff & Phelps. “As we work to make it out on the other side of this pandemic, logistics warehouses will become an increasingly desired investment opportunity.”

When asked about how the COVID-19 pandemic had impacted their own country’s GDP growth, nearly half of U.S. respondents saw damage to be minimal (between 1-5%). Those surveyed in Europe and the UK anticipated higher losses.

“Even as we head into the winter months, and the likelihood of a resurgence of the virus remains possible, it seems investors remain optimistic of the opportunities to commit their capital in commercial real estate,” Prindle said.

Duff & Phelps, a leading governance and risk solutions company, surveyed 325 senior directors and investors within the commercial real estate industry from the EU (54%), U.S. (25%), and UK (18%). Survey respondents worked for private property companies, publicly listed property companies including REITs, and investment managers.