New Normal the future of the real estate industry...2 days ago · New Normal – the future of the...

New Normal –the future of the real estate industry

WebCast 14. Oktober 2020 10:00 – 11:00 Uhr

PwC Investor Survey, Future of Working &

Insights UK

• Spotlight Residential & market trends for Office, Logistic & Retail

– Introduction of the latest PwC Investor Survey

• How do we work in the future? – Innovative working environments

• Update Real Estate Markets UK – Is the crisis 2.0 imminent?

© 2020 PricewaterhouseCoopers GmbH Wirtschaftsprüfungsgesellschaft.

Alle Rechte vorbehalten. "PwC" bezeichnet in diesem Dokument die PricewaterhouseCoopers GmbH Wirtschaftsprüfungsgesellschaft, die eine Mitgliedsgesellschaft

der PricewaterhouseCoopers International Limited (PwCIL) ist. Jede der Mitgliedsgesellschaften der PwCIL ist eine rechtlich selbstständige Gesellschaft.

Registration via LINK: www.pwc-events.com/Real-Estate-WebCastUpdates and Informationen here: https://blogs.pwc.de/real-estate/

http://www.pwc-events.com/Real-Estate-WebCast

https://blogs.pwc.de/real-estate/

PwCPwC 2

14. Oktober 2020PwC Real Estate | WebCast

Thomas Veith

Partner, PwC Real Estate Leader, Germany

[email protected]

Christiane Conrads LL.M

Head of German Real Estate Desk, London

[email protected]

Rita Marie Roland

Director, PwC Real Estate, Germany

[email protected]

Dirk Hennig

Partner, PwC Real Assets, Germany

[email protected]

PwC

Sneak Preview Germany:Covid-19 leads to an escape into quality

Thomas Veith


[email protected]

PwC Investor Survey Vol. 12

3


Approach

• Quantitative assessment of all-risk-yields (stable. NOI

/ net purchase price)

• A broad spectrum of investors is asked to give their

opinions on returns and letting assumptions

Rent development in general

• All letting assumptions are more cautious, but not

consistently negative (e.g. positive for logistics)

• In primary locations, 53% of the investors surveyed

expect rents to remain stable (across all asset

classes), while 60% expect falling rents in

secondary locations

PwC

Covid-19 influences negative development in secondary locations

4


• Expectations of investors regarding the development

of future interest rates:

− Short term: Stable (87% of investors expect)

− Mid-term: Stable (73%)

− Long-term: increasing (47%)

• Investors continue to see a correlation between real

estate returns and the general trend in interest

rates (67%)

• Commercial real estate (especially Retail, Hotel and

Entertainment) affected by the crisis leads to yield

adjustments, while Office is (still) unimpressed in

prime locations

• It also shows that the yield gap between Prime and

Value Add is widening, according to the motto:

Expensive becomes even more expensive, cheap

becomes cheaper

Yields

Auszug aus Investor Survey Vol. 12

PwC

For office investments All-In-Yields decrease despite Covid-19

5


Despite ongoing discussion about the implications of Covid-

19 on office real estate, no crisis can be recognized

• Top-7 Core: Yield compression continues in the top cities of

Munich (-46bps), Berlin (-31bps) and Hamburg (-27bps)

• Top 7 risk classes: Value-add (-18bps), Core (-27bps) Core

plus (-59bps)

• Top 7 rents: only slight rental growth (+0.7%)

• Regional Cities: Core properties (-6bps), Core-plus (-35bps),

Value-Add (-9 bps)

• Region: increased interest in the regions leads to declining

yields - Core (-11bps), Core-plus (-18bps), Value-add (-

15bps)

• Particularly in demand: Long-term rental contracts with

state or municipal players - also in B locations

Office

PwC

Differentiated image according to usage types:

• Highstreet yields Top-7: Core (-11bps), Core Plus and

Value Add (-17bps)

• Highstreet rents Top-7: only slight weakening (-0.6%)

• Highstreet yields Regional Cities: Core (-36 bps), Core

Plus (-33bps), Value Add (-23 bps)

• Highstreet rents Regional Cities: some losers, but slight

average rent increases expected (+0.7%)

• Opposite movements in the asset class: winners are

supermarkets and specialty stores (with a high proportion

of food), losers are out-of-town shopping centers (falling

rents, higher yields and more incentives)

• Changes in current rental contract negotiations:

− More flexibility and transparency in rental contracts

− Higher share of sales with lower minimum rent (portfolio

solutions are being sought)

Non-food retail as the big loser of the crisis!

6


Retail

PwC

Spotlight: Beds & sheds - Everybody’s darling in

times of COVID?

PwC Real Estate | COVID-19 WebCast

Lower rent default risk for residential real estate compared

to commercial real estate (more stable cash flows)

Continued strong (over)demand – for many years the

demand for housing in many cities and regions has

exceeded the limited supply (in parts already above pre-

crisis levels)

Shift in the investment focus of retail (excluding food,

DIY etc.) and hotel leads to additional stimulation of

demand

More Home Office – increasing work from home as one

of the drivers for increasing demands, price and rents for

residential real estate

Beds & sheds-strategy in the spotlight of our survey

Beds & sheds as a panacea?

14. Oktober 2020

Thomas Veith

Partner, PwC Real Estate Deals Leader Germany

[email protected]

Dirk Hennig


[email protected]

7

PwC

w

14. Oktober 2020

8

Residential shows itself to Commercial with resilience!

• Residential and senior citizen real estate are much

more resilient than other asset classes - one of the

reasons why portfolio allocations are shifting towards

residential!

• The success story of Residential is also reflected in

the PwC Real Estate Index - the valuations of

German residential real estate companies reach a

new all-time high despite Covid-19

• Nevertheless: the ongoing activity of the regulator

(discussions about rent brakes, rent caps, etc.) is

considered by investors with caution!

Residential

PwC Real Estate | COVID-19 WebCast

PwC

• Although commercial real estate has been much

more severely affected by the crisis, logistics is

currently the exception – high demand continues!

• Favour of the hour – Investors are not only looking

at residential properties, but also at logistics

• This is also reflected in the yields - the 3% hurdle was

recently passed!

• Investors with an office or retail focus are also

increasingly looking at logistics as an addition to

their portfolios

• The continuing downward trend in stationary retail

moves "last mile" further into focus!

Logistics continues on the road to success!

9


Logistic

PwC

How to create the office of the future?

Rita Marie Roland


[email protected]

PwC US Remote Work Survey

• The majority of employers describe the change towards

working from home as successful

• Also in the future employees should & want to be able to

work more from home

• However, the majority of employees do not want to work

exclusively from their home office – the office continues to

serve as a place for social interaction

10


Will we achieve the same productivity if we don't all

work in the same place?

How many employees need a place for personal

exchange, and how often?

What role will the office play in the future?

The transformation to the Office of the Future

must be carefully thought through!

?

PwC 11

The new role of the

office Categorize employees

New "modeling" of the

office

Customize the way you

work

Why should employees continue to visit the

office?

Some activities may be outsourced to the

home office in the future:

• Creating work products

• Communicating

• Coaching

In other activities, personal interaction creates

measurable added value:

• Collaborating

• Commiting

• Community Building

321 4

How do the needs and tasks of individual

employees differ?

Indiv.

worker

Team

worker

Statisch Mobil

Collaborator Connector

Resident Rover

Zeit im Büro:

30-60%

Zeit im Büro:

30-60%

Zeit im Büro:

90-100%

Zeit im Büro:

0-20%

What implications does the flexible work

model have for spatial and area planning?

• Flexible workplaces with less space per

workplace instead of classic offices with

clear allocation,

• Social Hubs for social interaction,

• Meeting rooms for large meetings or

customer appointments,

• Team hubs with good technical equipment

and a focus on interactive work.

Which elements are essential for a

successful flexible work model?

• Standards & guidelines - Standards for

employee availability and performance

assessment.

• Routine - daily goals, jour-fixes etc.

• Tools and technology - flexible access

and processing of data from the home

office.

• Risk and control - secure data transfers

and communication channels.

Identification of all activities for which

employees will visit the office in the

future

Categorization of employees based on

their personalities, tasks and activities.

Flexible room planning based on the

findings of 1 & 2 (Why do employees

come to the office and how often?)

Implementation of standards and

routines as well as tightened data

security and technical upgrades.

Creating the office of the future – for steps tosucess!

14. Oktober 2020

PwC

UK shows a similar picture compared to Germany



[email protected]

12


Status quo of the British real estate market

Retail

• Growth slump: approx. - 30% in

March, approx. - 14% in June

• Shopping centers and retail parks

most affected

Logistic

• Increase in online shopping and

deliveries

• Lack of available logistics space

Residential

• Work from home (WFH) intensifies

focus on residential

• Stamp Duty Holiday causes prices

to rise

Office

• WFH as a trigger for temporary

vacancies lead to structural

change and decline in demand

• Provider of flexible office concepts

as crisis winners

Hospitality & Leisure

• Hotels and event centers most

affected

• Uncertainty about how and

whether the sector will recover

Student Housing

• Switch to online university reduces

demand

• High number of new students due

to mishap in examination results

partially compensated

Affection of hotel

Affection of retail

PwC

Overview of government measures to relieve tenants

State aid measures for commercial and private

tenants:

Forfeiture Moratorium Period (Coronavirus Act 2020):

• Temporary relief measures in the event of termination of

commercial rental agreements due to non-payment of rent

• Valid since March 2020, meanwhile extended to 31 December

2020 (further extension likely)

Temporary Ban – Statutory Demands and Winding-up Petitions

• Temporary prevention for landlords from enforcing legal claims

or terminations against tenants for rent arrears (applies until

December 31, 2020)

Temporary Ban – Selling a Tenant’s Goods for Outstanding

Rent (CRAR)

• Temporary prohibition for landlords to compensate tenants for

rent arrears through seizure under the CRAR (Commercial Rent

Arrears Recovery Process)

• Valid since March 2020, meanwhile extended to 31 December

2020 (further extension likely)

13


PwC

Update Brexit – are we facing a No-Deal Brexit?

Hard vs. soft Brexit?

• EU exit effective since January 31, 2020 – UK officially a third

country of the EU and not part of European decision-making

• Transition period agreed until December 31, 2020 – EU law

remains in force until the end of the transition period!

• From January 1, 2021, UK withdraws from the EU internal

market and customs union – trade agreement urgently

needed until then!

• Two weeks ago, the draft of the Internal Market Act was

adopted by the House of Commons with a clear majority - thus

circumventing the compromise agreed last year between the

EU and the United Kingdom on the special position of Northern

Ireland

• Despite pressure from Brussels to revise the draft law, the UK

has so far stuck to it

• The clock is running fast – pressure to finalize trade

agreements is rising

• If no agreement is made, a no deal scenario is expected in

December

14


PwC

Will the EU taxonomy regulation continue to apply in the UK?

Continuation basically planned

• Statement of the British Ministry of Finance shows

that the British government reserves the right to

establish technical rules for taxonomy that differ from

those of the EU

• Different regulations possible – UK-based asset

managers and financial market participants may have to

follow different taxonomy rules for financial products

traded within EU markets!

• No final decision made – Government has not yet

decided why and whether to introduce a separate set of

rules for environmental objectives in the EU taxonomy

• We will keep you updated!

15


[…] We cannot comment at this stage on the extent to

which we will align with the EU after the

implementation period. We will therefore continue to

monitor this process as we consider the UK’s

approach to green finance standards.“

- Letter from John Glen, Economic Secretary to the Treasury,

May 2020

PwC

Questions to the PwC experts

Future of Working

Investor Survey

Investor Survey Spotlight Residential

Update UK

16


Thomas Veith


[email protected]



[email protected]

Rita Marie Roland


[email protected]

Dirk Hennig


[email protected]

PwC

PwC information about the New Normal and its impact on the real estate industry can be found here:

News on the subject of real estate also in the context

of New Normal


www.pwc.de/de/real-estate/pwcs-real-estate-institute.html

https://www.pwc.de/real-estate.html

Email address for questions to PwC experts on the

subject of New Normal

[email protected]

Fortnightly expert session via WebCast on

current topics

Wednesday 10:00 to 11:00

PwC Plus – Information about real assets with

push message function

https://pwcplus.de/

17

PwC Real Estate | WebCast 14. Oktober 2020


http://www.pwc.de/de/real-estate/pwcs-real-estate-institute.html

https://pwcplus.de/

The new normal –the future of thereal estate industry

Next session on 28th of October from10:00 am

Topic: „Office of the Future & PropTech Map“

Registration via Link: www.pwc-events.com/Real-Estate-WebCast

http://www.pwc-events.com/Real-Estate-WebCast

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