Changes in Leasing Demand
The demand for leasing since March has kept property managers, on their toes. The COVID-19 pandemic has created, a certain level of uncertainty in consumer patterns. At the start of the crisis, there was a significant drop in new lease contracts. Due to the imposed lockdowns and, the fear of the coronavirus; Individuals hurdled up in their homes. This caused retention rates to skyrocket.
Conversely, lease renewals rates began dropping as unemployment rates soared due to the shutdown of most economies. Successful post-Covid-19 real estate management firms are rapidly adapting, to this new reality. With much more difficulties regarding filling up vacancies, property managers found new ways to meet their clients halfway. The growing financial distress faced by renters pushed property managers, to encourage lease renewals. Renters and, managers opted to maintain flat rent rates. While the effects of Covid-19 have been felt at different rates based on geographical locations, the conclusion stays the same. For instance, lease demand has drastically dropped in Q2 of 2020 as compared to 2019. Key area – Real Estate Asset Management.
Repositioning of Assets Post COVID-19
- Managers who have faced a crisis before understanding the importance of patience when searching for new investment perspectives. Repricing risks usually follow situations of high market stress. This creates opportunities for those who have the capital to invest and can identify undervalued and mispriced assets.
- In this light, asset repositioning after Covid-19 will be all about timing. Building a strong portfolio will require repositioning assets based on the fluctuation in demand for the different aforementioned property types. Residential properties represent a steady source of cash involvement with an ever-present demand.
- As often the case in a post-crisis environment, these properties will be subject to miscalculated lease-up risks. This will allow for the quick acquisition of recently constructed properties withheld by developers in need of liquidity. They should, therefore, form the foundation upon which investors can build a strong portfolio.
- Buying residential properties will offer flexibility in sourcing other types of property that have a more volatile market. The acquisition of hospitality property should be centred around properties with cheap discount rates requiring little or no capital upgrades. Choosing properties in markets where occupancy rates are not directly influenced by seasonal or leisure-oriented demand will be ideal. After taking all this into consideration, we can confidently assert that the right timing to invest as supply and demand will only improve by 2021.