The turbulent year 2020, which was mainly marked by the Covid-19 pandemic, is slowly coming to an end. Changes have been noticeable in some industries, including real estate.
Due to the global pandemic, there have been numerous insolvency proceedings this year, which has led to a large amount of rental space becoming vacant on the real estate market. One would think that this would have a positive effect on the real estate market, as the market is finally picking up after many years of low vacancy rates. However, the current pandemic is causing several problems. On the one hand, many companies have switched to models such as working from home. In most cases, this is not intended to be a permanent arrangement, for example, so as not to lose personal contact, but some companies want to retain the concept in order to save on office rent, for example. For this reason, office space requirements are expected to decline in the future. Furthermore, almost no one is currently taking the risk of starting a start-up, which is why the current demand for commercial real estate is already falling sharply. This is one reason why the retail sector is currently the hardest hit in the real estate industry.
Another aspect is the closure of stores for several weeks due to the lockdown. As a result, many companies were unable to stay afloat due to a lack of income and had to file for bankruptcy. This issue is still ongoing (depending on the industry), which is why retailers want to wait and see how the current situation develops. For this reason, there is currently virtually no demand for retail space. In addition, expansion is unlikely to be a significant factor this year, which is why interest in larger spaces has declined. The situation is similar in the investment market. Countless capital investors are investing exclusively in rented properties, as vacant properties or properties with unlet retail space often appear unattractive to them. Although a large amount of space has now been put on the market, there is still a lack of demand for it.
Some are comparing the market to the dot-com bubble that caused a stir at the turn of the century. At that time, several thousand square meters of office space became available for sublease almost every day. Due to the drastic increase in the vacancy rate, rent levels fell significantly at the same time. The vacancy rate is also rising at present, but the increase at that time was much more severe than today's figures suggest.
It is assumed that the consequences of the current pandemic will not be as severe as those of the dot-com bubble. It can therefore be assumed that the market will most likely recover from the crisis much faster than was the case back then.
