Will the pandemic force companies to change their communication strategies?
- After the turmoil on Wall Street caused by the pandemic, the real estate industry struggled to cope.
- The effects of the coronavirus panic were felt most severely by companies involved in office and service buildings.
- News of planned interest rate hikes triggered panic in late June, which translated into declines for the entire real estate industry.
How did the real estate market fare during the pandemic?
The real estate industry, like many others, has been hit hard by the chaos present in the market in recent years. The pandemic caused some sectors to gain much more investor interest, while others struggled with a large decline. Among the companies that fared better in the pandemic were those involved in multifamily and industrial construction, while companies operating in the office and service markets were hit harder.
Although the pandemic itself is having less and less of an impact on the financial markets, new problems have emerged for investors to contend with. The rise in inflation and the interest rate hikes that are following it are at this point the factors that are having the strongest impact on declines in company listings. The chaos on Wall Street, which at the end of June was triggered by further news of projected interest rate hikes, was evident on the listings of all companies involved in the real estate industry.
Panic on Wall Street
To adequately demonstrate the scale of the chaos in question, it is necessary to cite specific data. The quotations of the most important market for us, i.e. the office and service industry, have fallen to their lowest level since the pandemic panic broke out. This is well illustrated by SL Green, a fund that invests mainly in office buildings and shopping centers. Over the course of the year, this fund saw a 30 percent drop in the value of its listings. By contrast, comparing the figures with the 2018 peak, this is a drop of as much as 70 percent.
While other sectors of the real estate industry coped better with the turmoil during the pandemic, the June chaos was felt just as hard as the office sector. Declines of several dozen percent were recorded by both Prologis, a fund that invests mainly in logistics properties, and Lennar, a homebuilding company.
The panic-induced turmoil was also felt by the proptech sector. An example of this is the listing of Redfin, a real estate brokerage company. The value of the listing has been steadily declining for more than a year - comparing the figures to the beginning of 2021, this is a drop of about 70 percent.
Jak spadki notowań wpłyną na branżę nieruchomości?
The effects of June's Wall Street turmoil are starting to become apparent now, but they will become even more acute in the future. Companies whose stock prices have plummeted by tens of percent will not be able to afford to hire new employees, and in some cases, even to keep their current employees. An example of this is the aforementioned Redfin, which has already announced layoffs.
For many companies, this also means difficulties in further investing, acquiring other companies or financing startups. This will result in fewer and fewer jobs being created in the market. Many are predicting a recession, although as some experts argue, the current situation does not look as bad as it did before the 2008 crisis.
w Brookfield Partners