Is COVID-19 the death-knell for physical retail?

Retail has been hit hard by the COVID-19 crisis and lasting changes to online spending will bring further pain. While our estimates suggest that the impact is likely to be less severe than structural change in offices, the rental outlook is expected to remain weak and a faster online transition will reinforce this. In the longer term, we expect the sector will continue to underperform, though how much will vary between markets and will be driven by both online migration and other market conditions. Overall, the UK is most exposed, along with a few European markets, while the US may also be vulnerable later in the decade.
Andrew Burrell Chief Property Economist
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More from US Housing

US Housing Market Data Response

Mortgage Applications (Nov.)

A rise in mortgage rates to an eight-month high of 3.31% by the end of November failed to dampen home purchase demand, which surged to a nine-month high. The drop in 10-year Treasury yields from the arrival of the Omicron variant implies mortgage rates will fall back over the next couple of weeks, which may provide some further support to demand. But with affordability stretched we doubt the current level of home purchase applications can be sustained beyond the next few weeks.

1 December 2021

US Housing Market Data Response

Case-Shiller/FHFA House Prices (Sep.)

Annual house price growth fell for the first time in 16-months in September, and stretched affordability means it should continue to slow. It is too soon to say what impact the arrival of the Omicron variant will have on the housing market. But one immediate effect has been a fall in interest rates, which if sustained may give prices some support over the remainder of the year.

30 November 2021

US Housing Market Update

Why are pending and existing home sales diverging?

An increase in the quality of mortgage borrowers, and record low inventory, are boosting the mortgage closing rate and leading to an increase in the share of pending home sales converted into existing home sales. Those factors are not set to go into reverse anytime soon, so we don’t think existing sales will snap back to match the pending sales index over the next few months.

29 November 2021

More from Andrew Burrell

UK Commercial Property Update

Office markets to shrug off end of furlough

The government’s furlough scheme is regarded as one of the successes of the UK’s coronavirus policy response, but all good things must come to an end. Over the next few months, its unwinding will bring some risks, though we do not expect these to have a major impact on UK office markets.

2 July 2021

Non-Euro European Commercial Property Outlook

Emerging Europe: Industrial still a bright spot

With virus restrictions set to be eased further, we expect the recovery in economic activity to gather pace from Q3, which should give occupier markets a lift. But the pick-up will not be enough to prevent falls in office and retail rents this year. And further out, large supply pipelines and structural change will keep rental values in check. Meanwhile, with monetary policy set to normalise earlier than we had initially anticipated, we have now pencilled in sharper property yield rises across all sectors from 2023. As a result, we expect capital values to barely grow over the next five years. In turn, total returns will be dominated by income returns, with industrial outperforming offices and retail, echoing our sectoral rankings for western Europe.

25 June 2021

UK Commercial Property Update

Remote working one year on

A year ago, we were just digesting the impact of remote working, but already permanent change looked likely. And while we know more now and continue to refine our views, we see little reason to change our conclusions from last summer that office demand will suffer a major hit from this shift.

23 June 2021
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