Cushman & Wakefield summarised the latest progress and impacts the Czech Republic’s real estate sector is facing due to the coronavirus outbreak.
C&W will soon start analysing the figures for the first quarter, which will suggest what was taking place on the commercial real estate market, in particular during the turbulent month of March. The advantage is that the global markets have been anticipating the onset of recession for some time and many businesses adapted their plans accordingly. This also applies to the real estate sector where the supply overhang is not high due to the preparations for the cooling of the economy, which should accelerate the return to normal once the pandemic is over.
The office sector has been among those less affected on the real estate market to date. The now widespread home office mode of operation might alter companies´ attitude to remote working and most likely show in changes to the structure and size of office space in the future. As a result of companies now not being able to fully use their offices, they may become more interested in more flexible lease agreements. This could prove to be an advantage for the flexible offices sector which might be hit severely.
The first changes that are already transforming the industrial property sector – both negatively and positively – became apparent immediately after the imposition of the restrictions. With retailers, restaurants and hotels being the first to feel the impact, the related logistics and storage sectors are now facing difficulties due to suspended deliveries of goods from the affected areas as well as due to the risk of employees being quarantined. However, the increasing demand for e-commerce sparked off on-line retailers’ demand for short-term lease of storage space. For the industrial property sector’s future, flexibility seems to be the keyword.
Retail is one of the sectors most affected by the recent developments, yet it should also play a pivotal role in restarting the economy. The restrictions imposed on retailers have a profound impact on the performance of shopping centres which represent a major part of the Czech retail segment and substantially contribute to employment and to the state budget. This is why the government and other stakeholders should pay attention to them and give them support adequate to their importance, with the whole retail sector being crucial for the quick start of the economy.
With hotels in Prague now reporting over 95% drop in occupancy, it is obvious that the hospitality sector is notably impacted. However, hotels should not resort to discounting, cancellations of forward bookings or even radical layoffs or tenant dismissals. Such actions could impact the speed of subsequent recovery and therefore hotels should rather defer the business than cancel it in order to be ready when tourism eventually returns.
The shared goal of all the stakeholders – the owners, tenants and managers – should be to start a dialogue and seek a way of saving the market together, so that it is affected as little as possible and shopping centre customers and office building users can once again enjoy the services to the full extent they are used to.
Project & development services
Whilst a downturn in the construction industry is expected, the current restrictions still allow some projects to continue, with health and safety measures on construction sites more important than before. The biggest impact is on construction projects requiring permits and statements from the authorities whose work is now delayed.
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