As the current crisis situation unravels, it’s obvious that the impact on the global economy and the SEE region will be as wide and far reaching as the virus itself. It’s vital that we find new ways to share information and promote our companies, strategies and projects.
EuropaProperty held an online panel, made up of industry leaders, who shared their thoughts and experience with viewers regarding the crisis, its many challenges to the real estate sector, but also a focus on the opportunities that will arise in the coming months.
“This latest crisis comes with an additional health challenge, which is a double whammy to the industry,” commented David Evans CEO at Optim Project Management. “However, all our sites are still active; but we have reduced some staff on some sites. Obviously, we are taking care of health and safety issues. Unfortunately, we have some contracts suspended, particularly in the hotel and hospitality segments. Some of the contracts for design or design management have been suspended also. I see a tough road ahead for the retail sector.”
Randy Tharp, Country Executive at Epstein International, said: “Most of our clients are continuing as normal. The work load requested from food retailers and supply chain operators – for example – is increasing. In some cases, we are being asked to speed up on these types of projects. I see great opportunities for Romania going forward as a low cost and an efficient production destination.”
Geo Margescu Founder and CEO at Forte Partners, added: “We are adhering to the governmental rules about the coronavirus – for example – we are very careful with the health of our contractors and subcontractors. We are able to keep our development sites going. In my opinion, this is the time that developers can prove their professionalism. It’s these types of situations where developers can prove how good they are, and how well prepared. We need to be close to everyone involved in this process from banks to tenants. I believe we will come out on the other side OK.”
Mihai Paduroiu, CEO of the Office Division at One United Properties, continued, “We have seven sites which are active, and are going very well, we are ahead of schedule. We are very focused on keeping people safe – we are following all the instructions from the authorities, and introducing very strict measures and procedures for health and safety. At the moment we are making sure that deliveries and handovers will happen. There are few benefits to the developers at this time as suppliers are more flexible and we have easier access to materials.”
Commenting on the office market and co-flex product in particular, New Work’s CEO Hubert Abt, said, “Home office is not efficient, which is resulting in new requests for tenants in our portfolio. However, on the downside, we expect a 50 percent fall from rents in the month of May, hopefully it will better in June. We have to speak to our landlords and what we can do concerning referrals of payments etc – we have three times the workload now because of the current situation. I foresee low traffic for the rest of the year. Will it affect rents? We will be happy if we can keep last year’s revenues plus 20 percent.”
Panellists agreed that so far the impact on investors is minimal but the future is less clear. Lori Collin from Lions Head, commented: “Two weeks ago we were about to start due diligence, we are delaying things now because there is a lot of uncertainty around the guarantees of the NOI and the product’s delivery. It’s not a matter of pricing it is the uncertainty going forward. For example, lease contracts, we have to be very careful with them now. We are waiting for things to settle. It’s too early to discuss distressed assets – this is a different crisis – this is more like a natural disaster.”
Beatrice Dumitrascu, Residential Director at One United Properties, added: “This is a new situation for everyone at the moment. We are adapting by trying to manage social distancing and working from home. We are on schedule to finish all our ongoing projects. We have the equity for this. It’s important to build what you have started. We have to find solutions and how to be closer to the client, we have introduced virtual tours of our developments, for example. I believe residential will be a good place to invest in the future. It is a safe place to invest.”
Commenting on what reliefs for tenants are being implemented, Lori Collin, said, “We are treating every tenant individually. Office tenants have been quiet so far, it hasn’t affected them so much yet. I think cash flow for them will not have an impact until Q3 and Q4. In Romania we have good AAA tenants and top spec buildings, which helps. However, retailers are having a different story.”
The panel agreed that the big players with the money to overcome this period are going to be the main beneficiaries from this time. There will also be some positive affects to some sectors if this situation is solved quickly. The region will still be an attractive destination for investors, with the logistics, prime office and residential sectors being the most popular.
Concluding the panel said, “We may see new players enter the market and new money – not right away – but maybe from quarter three investors from other sectors are going to be looking for more secure or less volatile sectors – for example prime office rents in all the major cities of CEE are more secure. This could be beneficial for the real estate sector.”