Any impact on real estate from a downturn in the global economy due to the outbreak of the coronavirus pandemic “will probably be relatively limited”, according to DWS.
In a research report, the firm said the pandemic was reminiscent of 2001 when the global shock of 9/11 similarly battered the world’s economies but the effect on real estate supply and valuations was benign.
Although real estate was not immune to that cycle overall, only modest declines in pricing took place.
Today capital flows into real estate from institutions and REITs may be squeezed, but low interest rates may attract investment instead from levered buyers and yield-seeking investors, DWS said.
In addition, the firm said, discipline in the debt markets over the course of the current cycle has minimised the risk of any widespread distressed selling.
Low vacancy levels and prudent levels of construction in most markets also bode well for the property sector going forwards.
Therefore DWS said it was “relatively sanguine” about the property sector and believes that some upward pressure on yields may even be seen.
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