2020 seems to be a devastating year in multiple ways. The ongoing COVID-19 pandemic, as well as the accompanying lockdown, has led to the closing of various shops, offices and other forms of commercial real estate. As a result, commercial real estate is now facing an undeniable drop in prices, with both retail and work space getting cheaper each day.
Though the coronavirus did push some businesses over the edge, the financial setback for retail is not completely unsurprising. Shops were already facing struggles as both town centers and shopping malls attracted less and less visitors every day. Physical shops found themselves at the losing end of an on-going battle between them and e-commerce. Stores closing due to the obligated lockdown were seen as a knockout blow.
For example: many shops in Italy, a country facing a lockdown more than a month before the United States did so, immediately experienced difficulties paying rent. Most of them tried renegotiating terms of loan with their respective tenants. Others shut down directly, leaving prices for retail space at lower rate, according to the Pan-European Commercial Property Price Index of Green Street: a time series that captures the value of commercial real estate in 25 different countries.
According to the Dutch website ZakelijkBankieren.nl, some cities in The Netherlands have already started converting shops into residential space. The city of Assen would be a prime example.
Office spaces
Not only shops and stores were hit with a drop in prices. According to the Price Index of Green Street, offices and industrial objects have also experienced a like-wise situation. Just like shops, landlords of office spaces in all of Europe are trying to meet with their tenants, in order to find a fair price for as long as the coronavirus continues to thrive.
At the same time there has been less shown interest in office space as an investment. This is probably due to the fact that more people committed to work from home. Some organizations have already stated that this so-called new way of work will be used more regularly in the future, even after a vaccin has been found.
