Retail property values are expected to fall up to 40 per cent over the next year due to the impact of the coronavirus pandemic on the UK high street, according to a survey of investors.
Commercial real estate investors are seeking more “pandemic resistant” assets, such as logistics, the analysis found.
Research by Duff & Phelps showed that 37 per cent and 36 per cent of investors expected retail and hotels respectively to suffer the worst long-term damage, with most expecting a drop in value of between 10 per cent and 40 per cent.
Nearly four in 10 respondents said they expect commercial real estate assets to fall between five and 10 per cent in value in 2020, while almost a third predict a drop of 10 per cent or more due to the pandemic.
However, more than a third of investors said the industrial and logistics sector will emerge the strongest from the coronavirus crisis, due to the online shopping boom increasing the importance of last-mile facilities.
Meanwhile 29 per cent of investors said residential assets would gain strength after the crisis, and 19 per cent were backing proptech.
Duff & Phelps real estate advisory group chairman John Slade said: “Covid-19 has had an unprecedented impact on the corporate real estate sector, with lockdowns effectively shutting down entire sectors for months.
“However, the damage has not been uniform, as some business sectors cannot be taken online as easily as others.
“Nonetheless, some sectors have proved remarkably resilient, particularly prime city centre offices and logistics properties. The value of these assets seems to have been maintained so far.”
90 per cent of firms expected asset prices to go back to pre-pandemic levels by next year, with four in 10 respondents saying they were more optimistic about the European real estate sector now than they were at the beginning of the crisis.