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Covid-19. Impact on Real Estate Market, Investor and Valuation

3 April 2020

We are facing a health emergency giving rise to a situation of necessary slowdown in economic activity.

Covid-19. Impact on Real Estate Market, Investor and Valuation

This COVID-19 pandemic is having a strong impact on all human activity at global scale. And, under this scenario, today we cannot avoid wondering about the potential consequences of this situation on the economy, the real estate market, companies and the valuation of assets.

The current situation is unpredictable, unusual and hugely volatile, and the size of its impact will depend on its duration.

Paradigm shift caused by COVID-19

The situation generated by the COVID-19 pandemic is shaking the foundations of all business models. But this does not necessarily have to be a negative thing, since the restrictions implemented have led to a forced and vertiginous adaptation, which has shown that Spanish companies are better prepared than expected.

Furthermore, after this situation nothing will be the same since it is bringing a transformation for both people and companies.

Consequences and trends on business behaviour

  • Companies’ rethinking of globalization strategies.
  • Promotion of working from home.
  • New models of contractual relationships.
  • Increase in R&D investment.
  • Increase in the use of technological tools (AI, RA, RV …)
  • Review of perception of the value of the companies’ tangible or intangible assets.

What impact is Covid-19 having on the different industries?

We observe how sectors already very hit before the crisis -such as the automotive, banking or retail industry- are being forced to speed up their transformation towards a new industry (car sharing, FinTech, e-commerce, etc.). We also see how the increase in R&D investment is causing the growth of other industries, such as bio-health, food, transport and home entertainment.

How is Covid-19 affecting the real estate market?

Both the real estate industry and the economy in general are facing difficult months. Even so, we consider that this situation is likely to bring about a paradigm shift at a general level throughout the real estate industry. A situation from which, in many aspects, we may emerge stronger, as well as modernized.


  • For the time being, construction is one of the activities allowed during the country’s state of alarm.
  • Large real estate developers are struggling to maintain their business plans and delivery times. On the other hand, small local developers have halted almost all construction works and been forced to lay off employees.
  • Asprima -Madrid’s Association of Real Estate Developers- has already warned of the economic consequences that could bring a complete halt to construction, with a 4.5% decline in GDP.


  • The number of property sale and purchase agreements and mortgage loans has plummeted due to the coronavirus pandemic. Both the General Council of Notaries and the Association of Property Registrars have put in place protocols in accordance with the scenario we find ourselves in. They have limited their activity to only strictly urgent matters, so the process will only be completed for those operations that were already prepared for the signature as well as those with a compelling reason.
  • Since financial institutions remain in operation -although adapted to working from home-, it is feasible to start a mortgage application process. Real estate credit intermediaries continue to be fully operational.
  • The state of alarm declaration and the prohibition to open customer-facing businesses could put at risk 15% of the total annual sales. This data could increase in the event of extension of the state of alarm.
  • In light of this situation, several real estate agencies are offering virtual tours to keep their clients’ interest.


  • Investors are in standby mode while waiting to see how the market behaves. Both private investors and family offices continue to analyse investment products, with increasing caution in such analyses and considering a wider decision-making context.
  • Planned sale processes are halting or extending their deadlines, as well as due diligence processes in progress. Some institutional foreign funds are considering their new investment strategy in light of this new situation.
  • Windows of opportunity arise, such as rent drops and the market correction, especially in shopping centres and retail parks.
  • During the previous financial downturn, High Street properties kept stable rent levels and withstood the market paralysis, becoming a safe haven.
  • e-commerce is experiencing a new upswing. This may be the turning point at which a large part of the population that was still opposed to purchasing products online make their first purchase, what they will continue to do in the future.


  • Investment in the office sector is not suffering the same impact -at least for the time being-. Although the demand for office space and early-stage searches have stopped, agreement drafts about to be signed are very likely to go ahead.
  • Lots of property owners are also likely to offer discounts through rent-free periods in order to continue generating interest.
  • The office market is one of the markets that will have to be adapted after the crisis, since the situation has led to the largest work-from-home experiment ever.
  • Once normality is restored, the work-from-home option will be considered by a large number of companies, which will mean a change in their needs, promoting initiatives that were already growing, such as coworking.


We are seeing an increase in the contracting of logistics land, where operators seek to respond to the storage and distribution needs caused by the coronavirus pandemic.
This phenomenon is likely to be replicated in central locations of large cities, with the aim of creating “city hubs”, from which the last-mile distribution can be made.


An adjustment is expected in hotel and student housing rents, whose activity has come to a halt.

How is the Investment Market reacting to the Covid-19 pandemic?

Investors are in waiting mode, analysing fluctuations between investment products and increasing caution in such analyses. This circumstance applies to both national and international investment. In any case, a rebound effect of international investment is expected once the health crisis is overcome, taking into account that there will be attractive returns at a time when interest rates will remain at record lows.

Does Covid-19 affect asset valuation?

  • Like in other aspects related to the macroeconomic situation, we will have to wait to know the duration of the restrictions to estimate their impact these may have on values, since the current standstill leaves them in a suspension situation.
  • The Spanish Association of Value Analysis (AEV) has communicated to its members a series of criteria and considerations related to restrictions on freedom of movement, including:
    • The activity carried out by appraisal companies and collaborating professionals is not subject to the suspension obligations set out in Royal Decree 463/2020, so it can remain active to date.
    • Working from home is recommended for office employees.
  • RICS has also offered recommendations to all its members and regulated companies on the evolution of business models, as well as the key parameters to consider in each of the valuations carried out under this methodology.

Precautionary measures are established in order to prevent new infections, to be taken both by the worker and the client during the physical inspections of the properties.