To many, being cooped up at home is making this health crisis feel as though it has been dragging on for months already. Yet as experts on Property Forum’s first online panel held on 31st March were quick to stress, the world has changed very rapidly and we are still within one billing cycle of when the restrictions were first imposed in the Czech Republic, meaning it is too soon to understand what the deeper, lasting impacts of the pandemic will be on the real estate market.

Even so, we are already seeing some trends emerging, including: 

• The effects of the crisis are not being felt evenly across the industry. Retail, hotels and coworking are being particularly hard hit, while logistics seems to be holding up, with online sales estimated to have risen by 44% since the government enacted home-isolation measures on 16th March. “But even that is uneven, because some of our tenants in shopping malls have seen their stores closed, while grocery tenants are doing extremely well,” said Noah Steinberg, Chairman & CEO at WING.

• The shift to e-commerce is being intensified by the pandemic, which will result in changes to supply chains, such as maintaining larger inventories, nearshoring and less dependency on suppliers from the Far East. Combined, this could translate into rising demand for modern logistics space in the Czech Republic and the rest of Central and Eastern Europe.

• We are starting to see potential deferrals of rent with the make-up at the backend of the lease. But this is not a blanket solution and landlords need to address each problem on a case-by-case basis. So far, this was mostly retail linked but increasingly is being felt in the office sector also. Communication will be key.

• The future of CEE’s business process outsourcing/shared service centre (BPO/SSC) sector, a large office tenant group in the Czech Republic, is open to question. Some multinationals could exit the region as part of cost-cutting measures following the pandemic, though there are signs that some technology companies are looking to return back-office support services to CEE from places like India and the Philippines, where remote working is proving difficult.

• Many landlords are in discussions with their banks across CEE looking for the deferral of capital repayments in Q2 and Q3, although interest on the loans will be paid to a certain extent perhaps.

• Mid- to end-August is a crucial date for retailers because they need to start ordering stock for the Christmas season. The highest turnover period of the year could be in jeopardy if there is still no clear picture on what trading conditions will be like then. In addition, retailers are not selling their current summer collections, leading to big stock overhangs. Experience from China showed a big surge of pent-up demand when the shops finally reopened, after retail sales fell 20.5% in the first two months of 2020.

• In terms of investment, closing deals under the current conditions will be possible if the deals in the pipeline are sufficiently advanced. However, investments much further back in the process are unlikely to be completed during the travel restrictions that make site visits impossible, which are especially important when investors are entering new markets.

• The giant stimulus packages that governments around the world are preparing will provide liquidity to the markets and make real estate an attractive asset class in the very low interest rate environment. “I think it will be a busy summer in terms of some activities and meetings,” said Victor Constantinescu, Managing Partner, Romania & Co-Head of Real Estate at Kinstellar.

• Construction across the region is still occurring, with Adrian Karczewicz, Head of Divestments at CEE of Skanska Commercial Development Europe, reporting that all their sites are 80-85% fully staffed. However, there are pockets of labour shortages, with Ukrainian workers returning home or workers self-isolating, and problems associated with transporting workers to/from project sites and materials being held up at borders.

• Coworking operators are taking a huge hit from the current widespread use of remote working and over the short to medium term will suffer from people not wanting to share office space with numerous people they don’t know. Savills initial research data from landlords shows that this office sector has the highest request of rental holidays in CEE at this time, with something in excess of 70% unable to meet rent demands.