The recent extension of the 40 percent rental discount on commercial properties for tenant-enterprises suffering due to the coronavirus crisis has created new conditions in the property market. Already several business groups, including some multinationals, have asked for an adjustment of rental rates not only for the period up until the lockdown restrictions are lifted, but at least until the end of the year.
The future profits of real estate investment companies (REICs) will likely be hurt by the adjustment of their portfolios’ assets to a reasonable value, starting from the picture that emerges once building assessments have been completed for the first half of the year.
What is certain is that “we are expecting lower values compared to those before the ongoing crisis,” as Yiannis Xylas, chief executive officer at chartered surveyors Geoaxis and head of the Valuation Professional Group of RICS Hellas, told Kathimerini.
The 40 percent discount on the rents paid for commercial properties will affect office and store rentals, with an impact on their values too. Xylas explained to Kathimerini that “when a REIC has stores in popular markets and leaseholders – the commercial chains – face financial problems either from being forced to shutter their stores or suffering a drop in turnover in the future, it is clear there is an issue for the property owner.”
This time it appears that shopping centers will face the biggest problem, as a large section of consumers will be put off by the possibility of crowds at large malls due to the ongoing need for social distancing. The same will apply to food service outlets, as well as office spaces that operate as co-working areas, leasing spaces to various different companies and professionals.
Hotels will also suffer a blow in terms of value as a result of the decline in tourism, although the share that most REICs hold in this sector is quite limited compared to other income property categories.
Xylas points out that the losses from rentals will have an immediate negative impact on the values of properties REICs own, as each asset’s value is partly determined by its potential revenues in the future.