Covid-19 expected to delay real estate deals

The worldwide spread of the coronavirus is expected to delay commercial real estate deals across India due to travel restrictions and lack of clarity on its impact on global economic growth. Commercial space deals in India were earlier estimated to remain robust in 2020 after hitting a record of over 60 million sq. ft. in 2019. However, deals could be pushed back by three to six months as key decision makers may not visit India in the backdrop of travel restrictions, according to transaction advisors. A final assessment of the impact of the coronavirus epidemic on the global economy may lead to changes in expansion plans and therefore space requirements. “It is a Black Swan event that comes with implications for the world economy. The disruption to business cycles is bound to impact commercial real estate decision-making as well,” said Gautam Saraf, managing director at Cushman & Wakefield in Mumbai. Demand remains intact, although decision-making for corporate real estate could face delays due to travel restrictions and as businesses scramble to cope with the larger economic impact, he said. Saraf expects delays of 2-3 quarters in decision making that could defer office space transactions. Shishir Baijal, Chairman & Managing Director, Knight Frank India, "The current pandemic has created some economic challenges across the world. We have seen a correction in stock and equity performances which is creating liquidity issues. However, demand in commercial real estate has remained strong. Due to the current advisories restricting travels, there may be delays in decision process. Therefore, the short- term impact on the real estate sector remains contained. The long-term impact remains unknown as the longevity of the crisis is uncertain.” Jaideep Dang, Managing Director- Hotels & Hospitality Group, JLL, "Business-wise, it will likely have an impact on the hospitality sector, especially on luxury hotels. Luxury chains have about 60-65% foreign travellers in their total guest composition and a large chunk of their business will potentially be impacted this season. Luxury hotel rates are also likely to decline in both quarter one and two as result. A full rebound may take time but we could see some recovery signs in the third quarter depending on the wider situation. Mid-scale brands on the other hand, derive more business from local tourists but even for those chains two quarters are going to be challenging as domestic travel restrictions come into force. Occupancies will be hit for sure but given the fluidity of this global situation, assessing the impact is a challenging proposition." Samantak Das, Executive Director and Head of Research, REIS, JLL, "The COVID-19 situation remains fluid and uncertainty still looms on the possible economic impact of the outbreak. Global supply chains will be disrupted in the short-term and this will undoubtedly have some impact on manufacturing in India. At this stage, the UN estimates the trade impact of the epidemic for India to be a $348 million on the external front. Given that the real estate sector contributes significantly to India’s economic growth, it is important to broadly analyse how the outbreak will influence this sector and it’s still premature to assess the current impact. We are already seeing a slump in the hotel and hospitality sector due to the cancellation of flights and closure of borders. The retail sector too will be challenged due to sourcing disruptions in the apparel, footwear and accessories space. Moreover, the slowdown is already being reflected in the delayed decisions by retailers to lease spaces. While the commercial sector has been on a strong foothold, investors and businesses will adopt a wait-and-see approach that we’re witnessing in other global markets.” At least three large deals involving over 500,000 sq. ft. each in Bengaluru and Mumbai, which were expected to be concluded by March end, have been deferred as occupiers sought time to assess the impact of the epidemic. Apart from deferring large space lease commitments, many companies are considering utilising co-working centres to tide over their immediate requirements until the scenario gets clear.