Commercial Real Estate Already Gets Hit in Europe: Prices for Retail Properties Plunge, Office Prices Sink

“Wide bid-ask spread points to lower values” going forward. It just started.

By Wolf Richter for WOLF STREET.

Over the past few years, the various sectors of commercial real estate have split into different trajectories, with some property types, such as industrial and office, rising to new highs, and with retail properties dropping further and further. Then came the issues surrounding Covid-19 and the lockdowns.

The trajectories suddenly turned into the same direction: down for all, but to different degrees, some sectors barely ticking down and other sectors dropping more sharply. And retail properties plunged.

Here is a first taste of the dynamics in Europe, where the lockdowns started earlier than in the US – in Italy, local lockdowns started on February 21, nearly a month before the first local lockdown in the US, the San Francisco Bay Area.

Retail properties have long been suffering from the structural shift of where retail spending takes place, the shift from brick-and-mortar stores to ecommerce. This shift had been relentlessly progressing over the years. But in March and April, it exploded higher as brick-and-mortar stores were shut down and ecommerce operations boomed.

Tenants of retail properties are now having trouble paying rent, or are unwilling to pay rent, as their stores are closed. Some of them will go out of business altogether; others will attempt to stay in business but renegotiate their leases. This whole dynamic has accelerated, as many future years of more or less gradual change are now being distilled into a few months. It has thrown the retail property sector into turmoil.

According to the Green Street Pan-European Commercial Property Price Index, which tracks prices of retail properties in the 25 most liquid real estate markets in Europe, all three sub-indices dropped in April, from March. But prices of retail properties plunged during the month:

  • Retail properties: -15.1%
  • Office properties: -6.6%
  • Industrial properties -0.7%,

“Wide bid-ask spread points to lower values” going forward, the report by Green Street Advisors notes.

The indices for office and industrial properties came off their all-time highs in March. But the all-time high of the retail index was the plateau period of mid-2015 to early 2016. Since then, the retail property index has plunged 29% (chart via Green Street Advisors, click to enlarge):

The report notes:

“The commercial real estate transaction market has largely come to a standstill as buyers and sellers adjust their underwriting expectations and try to agree on a fair price,” the Green Street report notes.

“During periods of wide bid-ask spreads, asset values often move closer to the bid than the ask. There is little to no investor demand in the retail sector and waning investor demand for sub-prime office buildings today.

“However, high-quality office and most industrial assets are still likely to trade at punchy capital values per square meter.”

The overall Green Street Pan-European CPPI, which is an average of the retail, office, industrial sectors, dropped 7.5% in April from March and is down 3.4% over the past 12 months:

Each index was set at 100 for the month of its pre-Global-Financial-Crisis peak in 2007. According to Green Street, prices are tracked in local currency. The indices capture the prices at which commercial real estate transactions are currently being negotiated and contracted, which makes the index very timely.

Much like the retail sector of commercial real estate, the office sector also faces new structural challenges going forward as work-from-home strategies have been successfully rolled out during the pandemic, and companies and service providers now see that it is a functional and manageable alternative with high productivity for many jobs. This too is playing out worldwide. And this – much like the acceleration of ecommerce – is one of many structural shifts coming out of this crisis.

European banks haven’t gotten over Financial Crisis 1 and the Euro Debt Crisis. Now there’s a new crisis. Deutsche Bank’s CEO going on TV to soothe nerves didn’t help matters. Read… European Banks Reveal Scale & Complexity of Crisis. Shares Hammered Back to 1987 Level

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  68 comments for “Commercial Real Estate Already Gets Hit in Europe: Prices for Retail Properties Plunge, Office Prices Sink

  1. May 4, 2020 at 6:35 pm

    My gut feeling is that much of the EU has a more neighborhood-centric business RE situation than the USofA does, and is thus more “Amazonification-proof”. Unlike a nice, walkable business district, nobody will miss a strip mall, or go to one just to “be around people”.

    • May 4, 2020 at 8:01 pm

      Aldi (German) and Carrefour (French) are among the largest retailers in the world. There are huge shopping centers in Europe. There are huge department stores in Europe. In the city centers (where tourists are), they just tend to go up instead of spreading out, similar to big stores in NY City, the center of San Francisco, and the like. In the suburbs, they can spread out more. Most neighborhood stores have long ago died (though there are still some, just like there are still some in San Francisco).

      • May 5, 2020 at 4:50 pm

        I didn’t mean to imply there were egg-vendors carrying straw baskets through neighborhood streets, just that older, more localized urban layouts might be slightly more resistant to anonymous online consumption than newer, car-centric suburban ones. Or not. Depends on the product/service, I guess.

    • Reality
      May 4, 2020 at 8:03 pm

      Long way to the bottom. Serves these clowns right. This is what you get when you worship the false god of debt. Keep borrowing, losers. Go ahead a dig your graves.

      • Mike
        May 4, 2020 at 8:33 pm

        I actually agree. Right now, ABC World News tonight is reporting that US government has evidence that this virus epidemic came about at least through certain negligence in Wuhan. If so, the EU and US rich may decide to give up some profits from Chinese quasi-slave labor to make that gang, I mean “government,” pay for their (US and EU rich’s) resulting losses. : -)

        There may be justice in the world after all.

        • Thomas Petersen
          May 5, 2020 at 2:06 am

          Hello from Europe.

          The US government usually has evidence of whatever fits their narrative, but can’t share due to national security.

          I’m sorry to say they broke this trust to get the war on Iraq started.

          By now even the vassals dont buy it, even if they have to follow the lead.

        • Bill from Australia
          May 5, 2020 at 2:18 am

          China refused to accept a ruling by the world court as regards their building and weaponising islands in the South Seas so the chances of winning litigation on the virus is below 0

        • timbers
          May 5, 2020 at 6:18 am

          ABC World News tonight is reporting that US government has evidence that this virus epidemic came about…”

          As in WMD in Iraq and you know who hacked our election.

          Never trust our “Intelligence Community.” Just look at their record. The have so many links to the Military Industrial Complex, generally what they say is always motived on what generates the biggest military spending or U.S. global economic interests.

          I’m reading a lot of debunking on various MSN claims against China, but as usual a lot of non sense it being “leaked” by “anonymous sources” so the dust hasn’t settled.

        • May 5, 2020 at 10:44 am

          Global wage spreads were compressing before the virus. Trumps trade wars came thirty years too late. Okay for a reactionary political party. China was already internalizing their economy, and outsourcing labor. They are one step ahead, the labor broker for the 21st century. Some of that labor will come back to Mexico, low income wage earners “left” to exploit. We? wisely agreed to accept their share of OPEC+ production cuts. The virus blame game is a cheap shot after the fight is over. What will the Swiss do? Print money, buy US stocks and use China’s new extended supply chain, ME and Africa. I love the new post colonial economy.

      • intosh
        May 4, 2020 at 10:57 pm

        Don’t rejoice too quickly. Their friends in Gov might buy the junk and have the masses pay for it.

        But I’m with you — it would serve them right.

    • Just Some Random Guy
      May 5, 2020 at 10:26 am

      Your gut feeling is stuck somewhere in 1977.

  2. VintageVNvet
    May 4, 2020 at 6:43 pm

    It would be helpful to have some idea of the values of the charts. Are they Euros per square meter?
    Thank you.

    • Root Farmer
      May 4, 2020 at 7:04 pm

      VintageVNvet,

      Relative indices set to 100 at the peak of Crisis #1. No units required.

      • VintageVNvet
        May 4, 2020 at 7:47 pm

        Yeah RF, I got that,,, but, still, it would be helpful to know what are the components of the ”relative indexes.”
        I do understand the reference, just not what is the basis, or bases.
        Just curious, having estimated construction of hundreds of thousands of SF of CRE in USA in last 20 years, to know values of CRE in Europe in more detail.
        And to be clear, I do understand these charts are ”blends.”

        • Root Farmer
          May 4, 2020 at 8:15 pm

          VintageVNvet,

          I’ve read many of your comments and can understand why this would be of such interest to you. As they say in Maine, “ya cont get there from hair”. The distillation of local market data into an index is their magic proprietary sauce. I found their description informative, though quantitatively unsatisfying …

          “The index is based on Green Street’s frequently updated estimates of price for the property portfolios of a typical commercial real estate investor. It is driven by the fundamental models maintained by the research team, which, in turn, are driven primarily by changes in market cap rates and net rental income.”

          “Each sector index is created by GDP weighting individual market indexes. The sector indexes are then equal weighted to create the Pan-European Commercial Property Index. Akin to familiar stock price indexes (e.g., S&P 500), GDP value weighting provides a gauge of aggregate (as opposed to average) values. Equal-weighted indexes, by contrast, put the same emphasis on a Dusseldorf industrial building as they do a trophy London office building.”

          I appreciate your comments, they are some of the ones I don’t reflexively skip.

        • njbr
          May 4, 2020 at 8:28 pm

          Google is your friend when you can be answered by a “cut and paste”

        • char
          May 4, 2020 at 8:29 pm

          GDP weighing is an “error”*. Areas were prices rises above average are also areas were GDP rises above average. At least that is assumption i make

          *feature is a better name than error. I think Green Street want to show a faster rising index than reality

        • May 5, 2020 at 12:25 am

          VintageVNvet,

          It’s like the S&P 500 stock index. It’s an index, not dollars per anything. Its purpose is to see direction and pace of change of a lot of disparate items averaged out. Some stocks in the S&P 500 go to zero and others soar, and the index gives you an idea of the direction of the overall market, not of each individual stock.

          But unlike stocks, commercial real estate doesn’t have billions of transactions every day. So the indices are built differently than a stock index.

  3. The artist formerly know as Marcus
    May 4, 2020 at 7:24 pm

    My former employer had a rigid absolutely-no-working-from-home policy. This was non negotiable from top down. Now I’m hearing from my old coworkers that the tide has shifted entirely. They are openly discussing a new approach where up to 50% of the company can permanently work from home. That kind of thing is playing out all over the world. It’s gonna be much different for commercial real estate.

    • implicit
      May 4, 2020 at 7:36 pm

      Working from home and increasing online sales are worthwhile efforts for the old brick and mortar crowd . The ones that will survive are already deriving a good portion of their sales from eCommerce. If they were already into the delivery aspect, like for furniture sales, than more power to them.

      • MiTurn
        May 5, 2020 at 7:34 am

        I just purchased online an auto part from a traditional brick-and-mortar auto parts store, which was then delivered to the store for me to pick up. This is a new selling point for this company. Later I received an email from the company asking me to respond to a 45 question survey (!) about my ‘online purchase experience.’

      • Thomas Roberts
        May 5, 2020 at 10:15 am

        implicit,

        Working from home, could be dangerous for a lot of people’s jobs. For quite a while, I would say that the majority of jobs in America, have been unnecessary, redundant, or could have been easily automated away. Now that so many people aren’t in the office, and a recession/depression is starting; I expect a lot of companies, will be thinking, “If they don’t actually need to be here, Do we really need so many employees?”. I expect the lockdown, to be responsible for millions and likely more millions of jobs to be automated away “on top of what recession/depression, what have caused”, even if they are currently working from home “i.e. currently still employed, and working”. This is not counting the job losses that will result from not needing those laid off employees anymore i.e. everything from janitors, to construction workers, to HR people “less employees in the office, less HR people”. I expect quite a lot of office jobs to be in the firing line, very soon.

        Ideally, what should have happened for decades, is that as automation ramped up, the working hours should have been cut to offset part of the reduction in jobs and the rest of the advantage of more automation, should have resulted in a higher standard of living across the board. Unfortunately, the top 10% absorbed all of it and then some and managed to screw up the economy.

        • Just Some Random Guy
          May 5, 2020 at 10:28 am

          I expect a lot of companies, will be thinking, “If they don’t actually need to be here, Do we really need so many employees?”.

          __

          I can see a lot of boomer managers thinking this way.

        • Thomas Roberts
          May 5, 2020 at 6:37 pm

          Alot of those boomer managers might want to cut some of those expensive boomer employees. It doesn’t help that if stuff becomes more automated, what remains might be more technical and the latter in life you get, the worse your ability to learn gets.

    • Jon
      May 4, 2020 at 7:43 pm

      The interesting thing would be: How would this spill over to residential real estate ?

      MOst of the MSM is saying housing prices would not drop barring few percentages in USA which is laughable to me but who knows.

      • char
        May 4, 2020 at 8:43 pm

        You mean residential real estate with good dependable* internet. I expect a vaccine or extermination of C19 soon. If the treat is gone in a year or two, which is not unlikely, than the demand and wants for housing wont change a lot, except for home office. Unlike the death experience that B&M retail goes through or the question what working from home will do to the office.

        *Spacex is good enough for netflix with 99 days out of a 100 but for work it may be to unreliable.

        • intosh
          May 4, 2020 at 11:01 pm

          Demand might not change but how about affordability? With 30m more unemployed in the US?

      • WES
        May 4, 2020 at 8:58 pm

        Jon:

        In many European countries capital gains taxes prevent rapid turnover of residential real estate.

        Many residential real estate properties are simply not for sale at any price.

        I would think this will tend to put a floor under European residential real estate prices.

        One must not forget the actions of the ECB either!

      • MCH
        May 4, 2020 at 9:02 pm

        at the risk of sounding opportunisitc… I wonder if this will allow me to claim a write off on taxes next year, since now there is a permanent set aside space at home for work.

        • Dave Kunkel
          May 5, 2020 at 1:00 pm

          That’s an almost automatic IRS audit flag.

      • Endeavor
        May 5, 2020 at 8:32 am

        If anyone thinks that the US will sit stewing in a deflationary environment for real estate I have a bridge in London to sell you. The trillions in new money created will be joined by millions of new ‘citizens’ to spend it. And corporate America will be well capitalized with debt to take advantage of it.

  4. Implicit
    May 4, 2020 at 7:26 pm

    When the real estate (RE) ETFs that hold many stocks from all three sectors s, all the stocks go down.
    One strategy could be sell the mixed ETFs and buy the industrial RE stocks like cell phone tower RE after the crash with the rest of them.

  5. Pablo
    May 4, 2020 at 7:35 pm

    Maybe time to consider rezoning from commercial to live-work or mixed-use.

  6. William Smith
    May 4, 2020 at 7:52 pm

    I was always surprised that employers weren’t looking at the number of square feet per employee as a separate cost center when the internet became a usable thing. Decades later it takes a pan-panic to force employers to do the sums they should have already been doing. Obviously there are huge ongoing saving to be made in reducing the square feet per employee (and transfer those costs to the employees themselves).

    • char
      May 4, 2020 at 8:46 pm

      The number of workers per square feet has already gone up a lot in the last decades.

      • WES
        May 4, 2020 at 9:02 pm

        Char:

        Don’t you just love those “open office concept” people who probably got big bonuses for suggesting the idea!

        • Thomas Roberts
          May 5, 2020 at 10:27 am

          If as many of those employees get their jobs automated away, as I think will happen, the open offices will get a lot roomier. Assuming, the companies don’t try to downsize, but, with how much money they are saving, they might not care for awhile. New offices, populated with less employees, might have a different layout “hard to predict”.

        • El Katz
          May 5, 2020 at 11:47 am

          My ex-employer recently rearranged their office spaces from individual cubicles into “group work tables”. There used to be 8 feet between people and now they are literally stacked upon each other. While the change was billed as “a step towards increased efficiency”, the actual reason was to reduce floor space per capita so they could move more people into the mothership and close ancillary rented buildings.

          Wonder how that is going to work for them in the near future with social distancing? “Non-essential” employees are already “working from home” – which, I fear, is only a prelude to a not insignificant layoff.

    • implicit
      May 4, 2020 at 8:54 pm

      It would seem that the next phase for people working at home and taking part in virtual meetings, and increased eCommerce, would be l the acceleration of virtual reality for employees and customers.
      Many people still prefer the nuances associated with touching products and using them prior to purchase. As virtual reality (VR) and 3d become more embedded into the marketplace, VR could offer more of a “real” engagement with the product for the customer. For instance, furniture or car sales and other expensive items.

      • William Smith
        May 4, 2020 at 11:52 pm

        Very early on I thought that if holograms can be made better (as well as 3D scanning), then that would provide a very viable alternative to meat meeting meat. I think VR is a bit of a fad because the basis of the technology is quite faulty. The eye *expects* to change focal length for far items, whereas VR provides a non-changing focal plane and confuses lots of biological systems. However, I think we might find virtual tours increasing where someone local takes a camera and live-streams a trip, and where the viewers could request the camera to look in different directions/places. Especially for nursing home residents, this might be a way for them to visit their childhood places without having to haul the meat around. Certainly technology will (and must) provide increasing possibilities till mankind finally learns how to dispense with the meat altogether. This pan-panic might just be the catalyst for all sorts of unexpected changes.

        • Cashboy
          May 5, 2020 at 4:44 am

          I have traveled to most cities and seen most tourist attractions over the last five years using google search; display images and if I want more info about the places can wiki whatever.

          No need for me to go anywhere to take photos with a smart phone and post on my face book account and wait for likes to get a dopamine hit.
          I can do all that sitting on a nice secluded beach not telling anyone where it is so that it remains peaceful.

        • implicit
          May 5, 2020 at 5:31 am

          The wave of the future. It can come crashing down on us,
          or we can have the surfboard, paddle board etc… ready.

          I’d like to try one of those VR headsets, could be fun.

        • Zantetsu
          May 5, 2020 at 10:18 am

          I have owned several high end PC VR headsets since 2016. I’m a bit of an early adopter of this technology.

          The first thing I should say is that you absolutely should try it before you judge it. You will be surprised by which of your preconceived notions are not true and which factors you never even thought of affect your experience.

          The next thing I would say is that you are right, the vergence-accomodation conflict (which is what you describe when you mention the fixed focal plane) is real and in my opinion it does lend some lack of reality to the experience. It’s not uncomfortable or straining in my experience, but something about it doesn’t “feel quite right”.

          Of course, there are many aspects of even high end systems that don’t feel quite right – the screen resolution being too low, the ‘screen door effect’ allowing you to see individual pixels, the backlight bleed from the LCD panels that have come to replace the OLED panels originally used, the narrow field of view … the list goes on.

          By far the biggest ‘immersion breaking’ part of VR is that you can see many things but cannot touch any of them. It frustrates the mind when everything has a solid appearance but your hand just passes through.

          However, none of these can completely prevent an immersive experience. If the experience itself is compelling, your mind can and will quickly forget about all of those shortcomings and become focused on the experience. It can feel incredibly ‘real’ when you are so engrossed in the content that you forget about all of the technical reasons that it doesn’t look or feel as real as real life.

          It can appear so real as to be genuinely frightening whenever anything scary happens in the experience, well beyond anything you’ve ever experienced in other forms of media. It can be immensely satisfying as well. And little things can surprise you – as an example, I played a game quite heavily called Fallout 4 VR and in this game you have a german shepherd (dog) as a companion. I would play for hours and get so used to seeing this dog run round me, similar to a real dog keeping up with me as I traversed the post-nuclear wasteland of that game, that when I took the headset off I would literally ‘feel like’ there was a dog in my apartment for some time afterwards, the same way that you ‘feel like’ there is a dog in your apartment when you actually own a dog but cannot see it at that moment.

          I think VR in easy to reproduce environments like business meetings will be quite effective.

          My son who is 12 has used VR extensively during this lockdown. He plays virtual paintball and has made many new ‘friends’ with other young kids who are doing the same. He looks forward to getting into the game every day or every other day for a couple of hours. That’s some form of social contact and it’s better than nothing given this lockdown.

        • Thomas Roberts
          May 5, 2020 at 10:32 am

          implicit,

          I doubt VR will ever be that mainstream, It will grow in use for video-games and niche applications, but, unless they find a way that it actually triggers realistic physical sensations and smells, that’s all it will probably amount to.

        • MCH
          May 5, 2020 at 11:10 am

          Supposedly Oculus have been hot items recently. It might also be driving computer sales since you need higher end rigs to run VR. They might be great for work.

          That said, I just can’t imagine purchasing a bed or major furniture without physically seeing it. A table here, a chair there, sure. But a sofa or a bed, I want to sit on it and have a feel for it first.

          Nor can I imagine using it to visit certain places like the Grand Canyon.

          Some things you just have to be there.

    • Engin-ear
      May 5, 2020 at 7:30 am

      The remote work has some value and it was almost completely extracted in the last 30 years. It is called offshoring.

      The traditional office is expensive, yes, but has interesting potential. Team spirit pushes people to do extra hours for free, when a colleague explains something to you – it goes as professional training free of charge for the employer.

      And you have a chance to build a healthy company culture, which may become your strategic advantage.

      Sorry, but I don’t believe that every modern day problem may be solved by a click on a web-page.

  7. MonkeyBusiness
    May 4, 2020 at 8:28 pm

    Maybe repurpose them for housing rental? Existing landlords might lose out, but this will lower rent for people who are looking while providing income for landlords.

  8. Petunia
    May 4, 2020 at 8:29 pm

    I never saw a need for stores to have more than one location per city. As a native New Yorker I grew up with one Barnes & Noble, one Barney’s, one Saks, one Henri Bendel, one FAO Schwarz, one Hammacher Schlemmer, etc. We didn’t have a Walmart or Nordstroms and we managed. Now with the internet, we don’t need more than one of any store in town.

  9. njbr
    May 4, 2020 at 8:31 pm

    “Work from home” policy or more leased square foot per employee.

    It’s a puzzle–it depends on how much the boss needs to watch

  10. WES
    May 4, 2020 at 8:49 pm

    I for one am not too concerned that nominal prices of real estate will fall very much in Europe before trending back up again.

    Not when the ECB has your back!

    • MC01
      May 5, 2020 at 1:58 pm

      The ECB has its hands full just trying to keep yields from blowing up right now. But like at the Fed and the Bank of Japan there isn’t a whole lot of appetite for doing much more than jawboning: central banks have been among the first to understand the immense scope of the economic damage caused not merely by Covid-19 and especially its response but also what the immense size of the stimulus packages promised by governments can create.

      To give an idea all European countries have promised stimulus packages running north of 15% of their GDP for at least two years… and that’s on top of the lost revenues because if businesses are seeing their cashflow reduced by 30, 40 or 50% they are not paying as many taxes as before.
      The ECB was apparently not consulted on the matter but is expected to bankroll all of this, plus the ventilated €1 trillion “recovery fund”… and to somehow keep CPI and PCE under control. This is literally impossible.

      European politicians have made a tons of promises they cannot keep and are only now starting to realize it. Not only that, but countries like Greece run the serious risk of even running out of cash to pay for essentials, such unemployment benefits for workers in the tourism industry. With the Stability Pact suspended and the ECB keeping yields from blowing up there won’t be budget crises this year, but this is an emergency short-term solution. Economies have to get back on grinding on with or without the promised vaccine. This means either effective containment strategies or biting the bullet and soldiering on: the threatened return of hard lockdowns is a luxury we simply cannot afford anymore.

      • char
        May 6, 2020 at 8:07 pm

        A hard lockdown is cheaper than a soft lockdown. A soft lockdown or a pure fear lockdown is something states can´t afford. The Swedish model is much more expensive than the Greek model

  11. mr wake up
    May 4, 2020 at 9:26 pm

    100,000sf big box signs lease during the lock down in NYC. Filled a vacant Kohls, the executed rent covers re taxes and cam – new terminology required, instead of NNN lease maybe negative net lease?

    IKEA concept store in same location replacing vacant sears – put on hold until further notice

    Industrial site 2 acre industrial sale – closing pending- no discount!

    Office market – what’s that? You mean people use to share elevators? Remeber we got rid of cubicles and private offices for open layout? Oops like we got rid of plastic bags for paper only to bring it back and ban the ban?

    Malls can be converted into massive hostels, food courts already in place to feed the masses, anchor stores converted into sports arena and educational centers. Roof and parking lots converted into farmland feed the masses.

    News @ 11

    -Moody’s downgrades the Middle class creates a new category the upper poverty class.

    -Good bye gated communities, hello and welcome gated zip codes!

    • MonkeyBusiness
      May 4, 2020 at 11:34 pm

      Gated zip codes are a dime a dozen …………. in third world countries which the US is rapidly turning into.

      Just another thing that the middle class can aspire to.

      • mr wake up
        May 4, 2020 at 11:53 pm

        Monkey Business

        Please list top dime worth of gated zip codes in the world.

        Would be interesting to see…..

    • Engin-ear
      May 5, 2020 at 7:51 am

      Hahaha…

      Yeah, let’s convert the offices and malls into quarantine gated areas, used 3 months a year during the yearly COVID outbreaks.

      Whole concept may be richly monetized.
      If goes public, the shares may exceed Tesla’s growth.

    • MCH
      May 5, 2020 at 11:13 am

      Gated zip codes with its own security. Just look at China for example, buildings have their own people assigned to verify if you belong there or not.

      It’s not a far stretch. Some of the world, we are already there.

  12. roddy6667
    May 4, 2020 at 11:01 pm

    If retail real estate is getting hard in Europe, it’s going to be Armageddon in America. The US has up to 4X the retail square footage per capita as European countries.

  13. BuySome
    May 4, 2020 at 11:07 pm

    The typical human response to this situation is eliminate all the structures that will never realize their full-life potential and then resume building more structures that will never realize a full-life potential. No one issuing permits will ever be expected to ask “Do we really need this thing?”. If they can sell the idea for financing, it will be built, public be dammed. No takers on the debt? Simple solution….An Egyptian Pyramid, Mayan Temple, Roman Palace all have the same commercial rental value of 0/SF. But to an industry living off of goose-necked gawkers of old rock piles, the value is incalculable. So let’s abandon these buildings, concoct a great story of their importance, and bring on the tourists. But we’ll need an international corporation called McMuseum.

  14. LR
    May 5, 2020 at 2:59 am

    Blackstone raises $10.7B for property fund that will target European real estate in the the largest private equity capital raising to complete since the pandemic’s outbreak.

    Blackstone will soon own most of the free world’s property turning everyone else into renters.

  15. Paul
    May 5, 2020 at 4:55 am

    Europe’s tourist areas are going to be a bloodbath. Within a couple Km of my old apartment in Nuremberg, there were hundreds of family owned shops that are facing an existential crisis. Some are stand alone shops and restaurants but many are part of larger residential spaces.

    My friends that have pubs are running fund raisers and have gofundme accounts.

    These are the companies governments neither see or give a damn about. I agree Wolf. This is going to be a bloodbath.

  16. MaryR
    May 5, 2020 at 9:08 am

    Ten years ago acquired a condo at the bottom of GFC property crash in South Florida. Moved to Florida full time in early 2013. Throughout that time, lots of small restaurants and retail or service shops in the strip malls closed, to the point that quite often only one shop (or none) would be operating in a given shopping area. It was depressing to see these derelict areas.

    We could not understand why there is so much shopping here. Yet by 2019, everything appeared to be fully recovered with shops and restaurants open and if a store closed, a new one would quickly open in the same location.

    I concluded it is a combination of the seasonal visitors and tourists that keep the small retail, restaurant and personal services sectors going. Even health services have an upswing in season. Most of the profits are generated by the high volume during that one seasonal quarter (+) of December/January through March/April. Canadian visitors are a big factor too.

    These visitors are gone and tourism is completely dead. If they do not resume next winter, 2021 will be far worse for many businesses here as their biggest profit period disappears. A lot of small business may not make it to 2021 as employment and spending in Florida is currently collapsed.

    Food Pantries are the new growth industry. Retail is on life support.

  17. May 5, 2020 at 10:30 am

    Yes, I agree that there is a downward trend in prices, and not only in Europe. For better or worse, time will tell. The advantages that commercial real estate is becoming more affordable are obvious, but there is the question of a small business that is suffering losses now.

  18. Just Some Random Guy
    May 5, 2020 at 10:34 am

    Real estate in NYC, SF and other mega cities is going to be negatively affected by this long term.

    Here are two options for an employer:

    1. Pay someone $200K a year to work in San Mateo.
    2. Pay someone $140K a year to work in Boise and save another I don’t know, $10K a year in office relates costs for that employee.

    Here are two options of the employee

    1. Earn $200K in San Mateo and pay $1M for a house, with an hour commute each way.

    2. Earn $140K in Boise and pay $500K for the same house, no commute, with lower property and income taxes as well

    It’s a win-win for everyone involved. Employer saves money, employee saves money and has a better quality of life. And with that $60K savings a year, the employer can spend $20K a year to fly them to the home office a few times a year as needed.

    Obviously 100% of the workforce can’t be remote, that’s not feasible. But I can see easily 25% of white collar workers who currently work in an office building somewhere no longer going to the office building anymore. And that will have a huge impact on real estate, both commercial and residential nationwide. Cities like Boise will see r/e values surge along with the Topekas and Santa Fes. Meanwhile, Seattle, SFBay, NYC, etc will see values decline. I won’t say crash, because people will still want to be in those places. But not as much as before.

    • char
      May 6, 2020 at 8:10 pm

      You do understand that working from home means at least a monthly meeting.

  19. akiddy111
    May 5, 2020 at 11:22 am

    It’s terribly sad to read that commercial real estate is getting hit in Europe.

    Meanwhile, high growth tech stocks are surging day in and day out. Wayfair, shopify, Chewy, Tesla and many other stocks climb quickly almost every trading session. It reminds me somewhat like 1996. That, too, was a very good time to enjoy tech growth.

    It really makes a lot os sense that global central banks will greatly assist asset values in their continued ascent over the next few years. Very wealthy people want more money. That’s perfectly normal.

    I hope others saw the obovious signs too. Tech is uniquely positioned to benefit from the continuing obsession with virophobia.

    I bought Zoom last Thursday after the FB announcement caused it to sell off for a few sessions.. Gosh, it seems all people are doing lately is organising either Zoom meetings or Microsoft Teams meetings. It’s almost like a surreal new world.

  20. Jdog
    May 5, 2020 at 11:24 am

    This virus is going to reek havoc with the entire retail industry. Mostly because the virus is changing the entire public mindset. For years the mindset had been to purchase and not save. Now that mindset is reversing and purchasing is becoming a “as needed” activity.

    • char
      May 5, 2020 at 2:07 pm

      I don’t see a change in that mindset. But it could be something that is only happening in the US.

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