BNP Paribas AM: A perspective on property in a global pandemic

The demand and supply shock from the coronavirus outbreak, and the resulting plunge in company earnings, has not passed real estate companies by.

From the outbreak of the coronavirus, financial markets never priced the virus as merely a touch of seasonal flu. While the disease was confined to China, they were slow to appreciate its full global economic significance. However since the proverbial penny dropped on 21 February, markets have been discounting a global demand and supply shock and the resulting plunge in company earnings, including the earnings of listed real estate investment companies.

The outbreak and its spread from China to become a pandemic has wreaked havoc on demand in industries including hospitality, retail/malls and offices. Logistics might benefit from increased e-commerce, but could also suffer amid delivery and supply chain problems.

So what is next for listed real estate? 

The truth is that we are uncharted territory. Given the unknown quantity that the virus represents for not only global public health, but also in terms of its implications, investors have struggled to assess the consequences and the uncertainty has caused equity markets to plummet. Market prices have moved in ways not seen since late 2008. Global real estate investment trust (REIT) markets have followed.

For more on the implications for markets and the outlook, read our posts on Investors’ Corner