4th November 2020

DLA Piper's 2020 Annual Global Real Estate State of the Market Survey

CRE experts indicate a bearish outlook due to uncertainty created by COVID-19

Largely due to the uncertainty and hesitation created by the COVID-19 pandemic, commercial real estate (CRE) experts anticipate a bearish market for the next 12 months, according to DLA Piper’s 2020 Global Real Estate State of the Market Survey. The survey was conducted in August and September 2020.

DLA Piper’s survey examines the views of CRE experts on the trajectory of the economic recovery, investment trends, geographic hotspots and general market outlook, and demonstrates a shift in thinking since 2019, when 50 percent of survey respondents were moderately bullish and confident that the economy would continue to grow in the next 12 months.

In contrast, the majority of respondents this year — 59 percent — anticipate a bearish market for at least the next 12 months. That outlook is tied to concern and hesitation around COVID-19, with 41 percent of those surveyed indicating they believe a second wave will impact economic growth. Despite the uncertainty, there is optimism among some experts. More than half of the respondents anticipate a return to pre-COVID-19 economic growth within 18 months to two years.

“Few aspects of our lives, let alone businesses and industries, escaped the impact of COVID-19 this year, and so it was remarkable to be able to field our annual survey in the midst of this global pandemic,” says John Sullivan, US chair and global co-chair of DLA Piper’s Real Estate practice. “Our assumption that COVID-19 had, and will continue to have, an impact on CRE was confirmed in the survey. Even with the shift away from bullish enthusiasm, we were pleasantly surprised to see some optimism for the future.”

Some bright spots in the CRE market

Despite the uncertainty caused by the global pandemic, some sectors are viewed as bright spots by survey respondents. Sixty-eight percent of the respondents find logistics and warehousing to be an attractive sector for growth, followed closely by life science and biotech at 58 percent. In addition, with a 3-percentage point increase from last year, 87 percent of survey respondents believe that e-commerce will continue to be an impactful element for the industry.

This year’s survey demonstrates a shift in the US cities that respondents believe are the ripest for investments. In 2019, respondents picked larger metropolitan areas including Chicago, Los Angeles, New York City and San Francisco as the most attractive for real estate investors. This year, however, smaller cities emerge as top US cities for investments for the next 12 months: Austin is ranked number one at 49 percent, followed closely by Nashville at 43 percent, Denver at 40 percent, Charlotte at 37 percent and Raleigh-Durham at 32 percent. By comparison, larger cities are seeing a significant drop in attractiveness: Los Angeles at 12 percent, San Francisco at 9 percent, Chicago at 6 percent and Philadelphia at 1 percent.

“One of the interesting trends we’ve seen emerge from COVID-19 is that some investors are moving away from larger metropolitan areas,” says Sullivan. “This year’s survey indicates that smaller cities with affordable suburbs are more attractive to many investors, companies and people. There has always been demand in these cities, but COVID-19 has likely accelerated that trend and may drive a new wave of investment.” 

Uncertainty about the future linked to COVID-19 solutions

Seventy-six percent of the survey respondents say the development of a vaccine will have the greatest impact on the global CRE industry, followed by a recovering global economy at 49 percent. The availability of a vaccine will greatly impact key real estate assets, including offices, hotels and retail spaces. In addition, healthy workplaces and office redesigns at 68 percent and 65 percent, respectively, are also seen as important factors for the CRE market in the next 12 months.

“There is consensus among CRE experts that the development of a COVID-19 vaccine will impact the CRE industry as well as a general expectation of a global economic recovery,” says Sullivan. “Given these findings, I’m confident that with a strategic focus on CRE solutions that support a COVID-19 recovery – logistics and warehouse, investment in smaller cities and healthy workplaces for example – the industry will return to growth. There certainly are hurdles, but there is a path towards a future recovery.”

To read the full report and learn more about the implications of COVID-19 on the CRE industry, please visit the webpage here.


Members of the American Chamber of Commerce in the Czech Republic