The prolonged lockdown as well as the mutation of the virus have dampened expectations of an economic recovery in 2021. According to current forecasts, economic output in Austria is not expected to return to pre-crisis levels before the second quarter of 2022. The record level of the yield spread between government bonds and real estate yields increases the attractiveness of real estate investments compared to other safe asset classes.
The Austrian investment market has seen a decline after the record year 2019. The low completion output in the office segment results in the fact that there is no very strong increase to expected in 2021. Yields in the more resilient asset classes office and logistics remain under pressure. Beside numerous negative effects, the crisis could also offer opportunities, for example by enabling the development of new asset classes.
The letting performance in 2020 turned out to be higher than initially forecasted. Based on the low completion rate combined with a high pre-letting rate, a decline is to be expected in 2021. New space requirements are not anticipated to decrease. In fact, new more spacious concepts will be integrated, providing more collaboration space.
The high resilience of the residential segment was particularly evident in the first half of 2020. The demand for investment-ready product is as strong as ever and actually on the rise. Completions are also not experiencing any delays, even though construction was halted for a short period of time. Slightly declining yields, stable rents and rising purchase prices are expected for the rest of the year.
After an almost complete shutdown of the retail sector, there has been an extremely positive development following its reopening. Pedestrian traffic in Austria's shopping centres almost reached the level of 2019.
The completions planned for 2020 remain almost unaffected given a generally low number as well as a high share of local suppliers.
Industrial & Logistics
In 2020, Vienna was once again able to record a take-up of space. The positive conditions such as growing e-commerce will continue to ensure that demand for logistics space will remain high. In and around Vienna, speculative project developments are increasingly coming onto the market, which partly cover the demand and at the same time ensure an increased supply that is also interesting for investors.
The tourism sector is one of the most heavily affected one by the Coronavirus crisis so far. Investors, operators and developers are equally confronted with changed framework conditions that demand innovative strategies to master the current challenges.
After enabling all accommodation facilities to reopen, the holiday hotel industry in particular is developing positively in comparison, while demand in the city hotel industry is recovering only slowly.