COVID-19 Impact on Real Estate - PwC Blogs...Apr 22, 2020 · Real estate markets • Asset classes • Real estate player • Real estate value chain. In the market has also arrived:

COVID-19 Impact on Real Estate

Weekly PwC Expert Session via WebCast22. April 2020, 10:00-11:00 amTopics:• Real Estate scenarios - today: Markets.Assets.Players.• COVID-19 as catalyst for ESG• Regulatory Update • Tax Update• Q&A session

Registration via LINK: https://www.pwc-events.com/Covid-19-Impact-Real-EstateQuestions to the PwC experts via e-mail to: [email protected] Updates and further informationen on https://blogs.pwc.de/real-estate/© 2020 PricewaterhouseCoopers GmbH Wirtschaftsprüfungsgesellschaft.Alle Rechte vorbehalten. "PwC" bezeichnet in diesem Dokument die PricewaterhouseCoopers GmbH Wirtschaftsprüfungsgesellschaft, die eine Mitgliedsgesellschaft der PricewaterhouseCoopers International Limited (PwCIL) ist. Jede der Mitgliedsgesellschaften der PwCIL ist eine rechtlich selbstständige Gesellschaft.

https://www.pwc-events.com/Covid-19-Impact-Real-Estate

https://blogs.pwc.de/real-estate/

PwC 222. April 2020PwC Real Estate | WebCast COVID-19

Susanne Eickermann-RiepePartner, PwC Real Estate Leader [email protected]

Thomas VeithPartner, PwC Real Estate Deals Leader [email protected]

Christiane Conrads LL.M.Head of German Real Estate Desk, London [email protected]

Thorsten SchniedersPartner, PwC Real Estate, [email protected]

Sven BehrendsPartner, PwC Real Assets, [email protected]

Eva HandrickPartner, PwC Real Estate Assurance, Germany [email protected]

PwC

Szenarios Real Estate Deep Dive


Real Estate – Facts. Forecasts. Big picture.

The Deep Dive includes an initial assessment of the impact of the COVID-19 crisis on the real estate industry. One thing is already clear: There will not be a single scenario. Types of use, market participants and segments as well as phases of the value chain are affected differently:• Capital markets• Real estate markets • Asset classes • Real estate player• Real estate value chainIn the market has also arrived: COVID-19 is a catalyst • Structural changes or initiated transformations of the industry

are accelerated (e.g. ESG, digitalization)• A new real estate cycle begins, long-term effects on the real

estate markets are becoming apparent• The behavior of users will change and with it the way we deal

with real estate22. April 2020PwC Real Estate | WebCast COVID-19

3

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Worst Case (L Shape)Prolonged Event

Best Case (V Shape)False Alarm

Base Case (U Shape)Measured Recovery

Scenarios and impacts – from short term impact to long term recession

Scenarios include V-, U- and L-shape, but neutral evaluation is also possible

Szen

ario

Impa

ct

• Reduction of medium-term growth

• Shift in investment and consumption (no reduction)

• Persistent recession: return to earlier GDP levels after several quarters

• Impairment of performance and growth (at least two years)

• Shift/limitation of investments & consumption

• Continued recession poses a drastic threat to the economy

• Return of total production to pre-Covid-19 level not foreseeable

• Strong influence on investment and consumption

422. April 2020

Neutral Case (N Shape)Non Event

• No or positive influence (at least temporarily) on medium-term growth

• Almost no impairment of the overall production and use

• Unchanged level of investment and consumption

PwC Real Estate | WebCast COVID-19

PwC

Historical events and their impact

522. April 2020

Historical examples of the recovery of the real estate sector in the wake of exogenous shocks and economic crises classified according to the V-, U- and L-shape:

− V: 2015, Chattanooga, TN, VW Diesel Scandal− U: 2003, Hongkong / Singapore, SARS Epidemic− L: 2006, New Orleans, Hurricane Katrina

What do we learn from these scenarios?

Real Estate - Facts

Thorsten SchniedersPartner, PwC Deals, [email protected]


PwC

2015, Chattanooga, VW Diesel scandal

2003, Hongkong / SingaporeSARS Epidemic

2005, New OrleansHurricane Katrina

6

False Alarm

• VW emissions scandal leads to considerable price effects in the short term on the Chattanooga property market

• The company's only production facility in the United States

• Prices drop by up to 15% in the immediate surroundings of the factory

• Recovery of real estate prices within a very short time

• Rents for retail and shop premises in the first half of 2003 fall by up to seven per cent or 18 % compared with the previous year

• Decline in office rents in 2003 and strong bounce-back in 2004

• Investment sentiment and activity is frozen during the SARS period significant reduction in investment volume for 6 months

• Destruction of the housing stock in New Orleans by about 50 percent

• Only after three years does the housing stock recover migration movement

• New Orleans is a smaller city today than it was before Hurricane Katrina

• Significantly reduced demand for housing followed by a worse price development compared to the rest of the USA

Measured Recovery Prolonged Event

Best Case – V Shape Base Case – U Shape Worst Case – L Shape

22. April 2020PwC Real Estate | WebCast COVID-19

Historical examples: Impacts on the real estate sector after exogenous shocks

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0

100

200

300

400

500

2012 2013 2014 2015 2016 2017 2018 2019

Absatzzahlen Fahrzeuge VW in den USA, in tsd

VW emissions scandal led to short-term distortions in the local US real estate market, but quickly "back to normal"

Background • Volkswagen is the largest private employer in

Chattanooga, TN, USA• Including supplier companies, around 20,000 jobs

are dependent on the Volkswagen factory.• Exhaust emissions scandal takes off with

revelations by US environmental authorities• As a result of the "diesel gate", there is great

uncertainty regarding the future development of the company and thus jobs

• Despite the diesel scandal, VW continues to operate the site and adheres to the expansion plans

Economic impact • Loss of reputation of the company worldwide• Volkswagen sales figures in the United States in

Q4 2015 collapse by more than 12% year-on-year as a result of the scandal

• Sales stop of passenger cars with 2.0 and 3.0 liter diesel engines in the USA

Implications for Real Estate• Reduction of transactions by about 30% and

short-term reduction of average real estate prices by up to 15% depending on the distance to the factory

• "Bounce-back effect" after about three months

VW sales figures in the USA (2016 - 2019) Price effect after weeks after announcement and geographical distance from the factory

Time Distance

Pric

e ef

fect


V Shape

PwC

SARS epidemic in Hong Kong leads to 6-month dip - after which real estate markets reach pre-crisis level

Background• In February 2003 the Severe Acute

Respiratory Syndrome (SARS) breaks out in Hong Kong

• Probably originating in the Chinese province of Guangdong

• Include measures to control the disease:– Quarantine measures to prevent chains

of infection– Closure of educational institutions for

about three weeks– Closure of public facilities– Large area disinfection– Reduction of social contacts– Duty to wear face masks

• Duration of the epidemic: approximately four months

Economic impact• Significant decline in GDP after the outbreak of

the epidemic• Return to pre-crisis level after two quarters

Implications for Real Estate• Stagnation of the investment market and

reduction of transactions by up to 72%• Residential real estate prices remain largely

stable, only a reduction of 1-3%• Return to normality after six months• Strong "bounce-back" of the office markets

U Shape

Source: Zillow Economic Research

SARS Epidemie

Transactions & Property Prices, Hongkong 2001- 2004

SARS Epidemie

GDP Hongkong 2001- 2004

Source: Zillow Economic Research22. April 2020PwC Real Estate | WebCast COVID-19

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-0,6

-0,4

-0,2

0

0,2

0,4

0,6

0

50000

100000

150000

200000

250000

2005 2006 2007 2008 2009 2010 2011Housing Stock New Orleans YoY % Change

Hurricane Katrina changes the New Orleans real estate market forever

Background• Hurricane Katrina hits the Gulf Coast of the

United States at the end of August 2005• Category 5 storm causes storm surges and

dam breaks in New Orleans• 80% of the city area will be flooded for

several weeks in the course of the storm• Most expensive natural disaster until the

Tohoku earthquake in 2011• Total amount of damage is approximately

USD 125 billion

Economic Impact• Reduction of the total population of New Orleans

from about 460,000 to about 230,000 inhabitants• Increase in unemployment from around 6% to up to

16% within one month after the hurricane

Implications for Real Estate• Loss of approx. 50% of the building stock • No transactions in the six weeks following the

storm • In the following years permanently worse property

price development compared to the rest of the United States

L Shape

Source: US Census Bureau, 2015

Residential portfolio New Orleans, USA 2005-2011


PwCPwC Real Estate | WebCast COVID-19

Future topic: Climate change and the influence of physical threats on the real estate markets

22. April 202010

2020Climate Change and physical threats• Climate change is already

influencing real estate markets, with properties exposed to sea level rise in the United States selling at a 7 percent discount to those with less exposure.

• Market intelligence provider Four Twenty Seven and real estate technology company GeoPhy have partnered to assess the exposure to the physical impacts of climate change of 73,500 properties owned by 321 listed Real Estate Investment Trusts (REITs).

• 35 percent of REITs properties are exposed to climate hazards.

Real Estate is especially prone to physical and transitional climate risks (e.g. flooding)

Source: Four Twenty Seven, 2018 / https://www.globalpropertyguide.com/news-what-lessons-can-property-investors-learn-from-the-last-economic-crisis-3891

The Bank of England derived future value changes caused by climate risks

Real Estate Assets

Value change from physical risks

Scenario A B C

Global Average -15% -30%

North America -15% -30%

Europe -8% -15%

Asia Pacific -30% -60%

Scenario Definitions:

A - sudden transition to well below 2°CB - orderly transition to well below 2°CC - 4°C increase in global temperature

Future

PwCPwC Real Estate | WebCast COVID-19

1122. April 2020


Markets. Assets. Players. -Challenging framework conditionsReal Estate - Forecast.

• Restrictions have a significant impact on economic activity. Europe is heading for a sharp recession, which will trigger significant policy responses.

• The investment volume is expected to be rather weak in the second half of the year. Unless there is a rapid recovery, the volume of business will remain subdued in 2020.

• The volatility of the financial markets is high. Real estate values tend to lag behind the movements on the broader stock markets.

• Rents and NOI are expected to come under increasing pressure, while yields will rise as liquidity becomes tighter. In contrast to past cycles, low interest rates and a subdued supply side are supportive.

PwC

• Real estate values will develop differently in the asset classes. The main drivers will be the adjusted cash flows and the new risk assessment of the earnings generated.

• Real estate segments such as hotels, restaurants and retail as well as the cyclical office markets will have to struggle. Logistics and housing will be the most resistant.

• Experience with real estate cycles suggests that markets are recovering and holding assets over the cycle limits the prospect of direct losses from a downturn.


22. April 2020

The forecast is cautious –a U-shape scenario is likely

Real Estate - Forecast.

PwC

The GDP impact in Germany is estimated at -5.8% to -9.3% for Germany 2020Scenario parametrization (extract GDP and unemployment)

Source: Economist Intelligence Unit (Base scenario); Strategy& analysis

Actual Base V-scenario (mild) U-scenario (severe) L-scenario (fatal)

2020 202220212019 2020 20222021 2020 20222021 2020 20222021

Comments

Further Parameters available: Consumer Price Index, USD Exchange Rate, Long-Term Bond Yields, National Stock Index, Oil Price, Gold Price

• We continuously monitor publications and the respective macroeconomic estimates to extract the ‘market view’

• Once we detect a significant deterioration of estimates (based on ‘market view’), we will revise scenarios and adjust parameters accordingly

13

Germany

- 0.9 1.61.6 -5.8 1.91.8 -7.2 1.10.2 -9.3 -0.6-0.6

3.1 3.3 3.23.2 6.1 4.14.5 6.8 4.55.0 8.2 5.35.3

GDP Growth(%)

Unemployment Rate (%)

Europe

- 1.3 1.61.7 -4.7 1.81.3

-5.4 1.20.4 -6.7 0.10.1

7.6 7.4 6.87.1 13.6 8.810.1

12.3 8.911.1 16.4 14.815.6

GDP Growth(%)


USA

- 1.7 2.01.8 -4.2 1.81.5

-6.3 2.10.0 -9.8 0.0-0.2

3.7 4.1 4.24.0 4.9 4.34.4

15.3 9.611.0 18.4 11.211.7

GDP Growth(%)


Aggregated Sources:

AS OF MARCH 30th, 2020


PwC

Markets. Assets. Players. Existing problems in the status quo, short-term crisis effects and long-term effects as a yardstick for individual scenarios

PwC Real Estate | WebCast COVID-19 22. April 202014

COVID-19 crisis & short-term impact Post-crisis

2

Actual effectsWhich effects on real estate

markets already be observed?

Crisis impact Which further effects may

COVID-19 has on real estate markets?

3

Behavior impactHow will the crisis change

peoples behavior?

Long-term changeWhat is COVID-19’s longer-term impact on real estate

markets?

Today

1

Status quoWhere are real estate

markets coming from?

Historical lessonsWhat lessons have been

learned from former events?

Pre-crisis

Crisis lessonsHow will governmental restrictions change?

PwC

Behavior. Bytes. Bricks. The effects of the crisis are not only driven by the markets, change in behavior also plays a role


Social Distancing Health Protection Travel Restrictions Digital Work & Home Office

Online Conferences Less Sharing Nearshoring /

Focus on Local

Changes in social behavior, in the desired experience – Showstopper?

Real Estate Markets

Real Estate Value chain

Real Estate Players

Real Estate Asset classes

Urban Cities & MetropolesLess Sharing

Markets. Assets. Players.

PwC

The COVID-19 crisis impact on Real Estate has to reflect someindustry changes and the market sentiment ….

Real Estate Markets• Real Estate Markets are

holding it´s breath

• Europe’s commercial real estate finance market is in disarray

• Liquidity of debt capital has been put into doubt as lenders pause

• Europe´s Real estate Capital market faces the prospect of a downturn

• Since 10 years it´s the first test of loans

Real Estate Value chain• The real estate industry

seems to get partly worse

• The value chain is partly interrupted and effects will depend upon the duration of the economic shutdown

• Investment decisions are postponed, Deal are on hold

• Reduced rental payments are followed be reduced operating income

• Market activity will slow down

Real Estate Players• Investors review existing

portfolios and improve their liquidity position

• Landlords and tenants are in negotiations

• Brokers will suffer from uncertainty

• Developers will have to wait for financing decisions or trying to obtain permits

• Facility managers are partly on hold and trying to mitigate health risks

Real Estate Asset classes• Hard hits on hospitality

and leisure, restaurants, bars and event locations as well as tourist driven areas

• Closed non food retail but booming food retail and drugstores

• CoWorking and CoLivinghit by infection fear

• Logistics for e-commerce doing well, x-boarder logistics stand still

• Offices not used but paid

• Residential in a good shape

16

Urban cities & Metropoles• Sleeping cities

• Social distancing is freezing social life

• Reduced economic activity leads to reduced social life

• No crowds, no gathering, no social life, no fun

• Fear for infection by using public transportation or sharing offers


PwC

… but also the long-term behavior post-crisis can act like a showstopper


Social distancing

Protect safteyand health

Less travel or gathering

Digital work & work for home

Video-conferencingLess sharing Nearshoring /

local first

PwC

Impact of the COVID-19 crisis on asset classes


Short-term impact 2020

Long-term impact 2022 & beyond

Retail (Food)

Retail (Non-Food) Office Logistics Hospitality &

Leisure Residential Restaurants, Bars & Events

positiv U V / neutral U L V / neutral U

neutral L U neutral L neutral U

PwC

Impact of the COVID-19 crisis on market players




(Financial)Investors Broker Architects &

Engineers Valuers Asset-/ Fund Managers

Property Managers

Facility Managers

V U V neutral neutral neutral U

neutral L U neutral neutral neutral U

PwC

Impact of the COVID-19 crisis on the real estate value chain




Project development Construction Renovation Portfolio

Management Maintenance Sale of property

Purchase of property

U V V neutral neutral V V

neutral neutral neutral neutral neutral neutral neutral

PwC

Impacts with a view to the future 2022 & beyond

Real Estate – Big Picture.


• Economic perspective - Japanese conditions, ongoing recession, impact on performance and growth, high debt, postponement/limitation of investment & consumption

• Capital Markets - Significant deterioration in financing options, new risk assessments, rise in interest rates

• Real Estate Markets - Residential and Logistics as winners, Commercial repositioned, reduced space requirements, shorter rental periods, almost all European cities affected

• Digitization - data availability significantly increased, real estate industry comprehensively digital, home office mix as "new normal", tracking and identification procedures for health & security

• Behavior - society has found its way back to "social life", but certain fears remain, desire to travel has returned cautiously, significantly less business travel, sharing with caution

2122. April 2020


PwC

COVID-19 as catalyst for ESG

• Investors are in ESG mode, the crisis sharpens the view and encourages additional questions

• Researchers are already monitoring the influence of S- and G-factors in addition to the environmental goals and giving signals for investment decisions

• Banks and insurance companies have already started using ESG criteria for ratings

• Impact on cost of capital becomes visible - every 3rd rating decision by Moody's was influenced by ESG issues in 2019 -mostly negatively by downgrading the rating or the outlook and with a direct impact on borrowing costs..

• Exogenous shocks due to physical risks set new standards in the assessment of investment decisions.

• Social and governance factors are transparent and also established as a benchmark for investment evaluation


Real Estate – Big Picture.


Thomas VeithPartner, PwC Real Estate Deals [email protected]

Christiane Conrads LL.MHead of German Real Estate Desk, [email protected]

PwC

ESG as a Game Changer


22. April 2020

• Institutional investors demand ESG criteria

• The demand from private investors will follow later

• Demand for ESG products and services

• Regulatory framework: EU taxonomy, disclosure requirements, etc.

• Industry Standards & Certifications

• National regulations and standards

Investor Behavior

Regulation Risk Management

• Real estate has a high ESG risk

• Stranded asset risks:

• Risks of transition• Physical risks• ESG

opportunities

Changed market environment – ESG as a Game Changer ESG factors have a significant influence on the value

Stakeholder Demand

Higher Rents Lower Yields

• Tenants need sustainable buildings

• Key stakeholders (i.e. politicians, employees, etc.) demand ESG criteria

• ESG integration enables higher rental income

• First movers participate from USP in various sectors

• Lower yields for buildings Higher selling prices

• Lower financing costs Better performance

PwC

The definition of an ESG strategy is necessary


Benefits of an ESG strategy • Competitive advantage in real estate financing in a more

competitive market environment;• Increased acceptance by employees, customers and society

in ESG-compliant crisis management (otherwise there is a risk of loss of reputation); focus on

• Social responsibility and • Solidarity;

• Increased resilience through life cycle analysis and the creation of flexible, high-quality real estate solutions;

• ESG-compliant usage concepts (e.g. flexible office solutions, high health and safety standards) are proving to be more resistant to pandemics;

• Share price development on the capital market confirms outperformance of ESG-compliant companies;

• Sustainable supply chains also in property management.

Risk of a ESG strategy • prioritizing short-term economic considerations at the expense of

the environment and society.

Christiane Conrads LL.MHead of German Real Estate Desk, [email protected]

PwC

Strategies and recommendations for action – exploiting opportunities in the current market environment


Targets• Increased transparency through reporting and information

obligations• Strengthening risk management processes• Quality improvement • Life cycle consideration as a business case (anticipation of

ESG aspects in each investment phase)

Fields of action in the operationalization• Strategy• Organization & processes• Regulation• Standards• Risk management

• Investment management• Tools & IT systems• Reporting• Legal & tax

ESG Strategy Implementation and Monitoring

Stakeholder involvement• Financier and equity partner• User• Service provider• Insurance

ESG Due Diligence• Definition of ESG investment criteria• Creation of gap analysis (ESG DD Report)• Derivation of concrete recommendations for actionGreen Contracts• Implementation of ESG criteria in all property-related contracts

(especially purchase, rental, management, financing and insurance contracts)

Adjustment of internal processes• Investment management• Risk management and controlling• Reporting

PwC

Update regulation - deadline extension due to COVID-19

ESMA & BaFin Relief


• In a public statement, the European Securities and Markets Authority (ESMA) has extended the deadlines for preparing semi-annual and annual reports for funds (AIF and UCITS). This applies to reporting periods ending between 31.12.2019 and 30.04.2020.

• Annual reports that refer to an end of the reporting period that lies between 31.12.2019 and 31.03.2020 deadline isextended by two months compared to the previous deadline

• Annual reports that refer to an end of the reporting period that lies after 01.04.2020 but before 01.05.2020: The deadline is extended by one month compared to the previous deadline

• semi-annual reports of UCITS referring to an end of the reporting period which is between 31.01.2020 and 31.03.2020 The deadline is extended by one month compared to the previous deadline

Eva HandrickPartnerin, PwC Real Estate Assurance, Germany [email protected]

PwC 2722. April 2020PwC Real Estate | WebCast COVID-19

Consideration in reporting until 31.12.19

• Focus on developments in the reporting period: Reporting on probable developments is generally not intended for investment funds and investment companies

• Events such as COVID-19, which can have a significant impact on the investment fund, must be included in the reporting and information on possible effects must be provided

• Clarification in the Annex that the effects of COVID-19 are not (yet) reflected in the values up to 31.12.19

• For investment companies: Risks threatening the existence of the company and how they are dealt with must be reported in the appendix to the financial statements

• If the auditor becomes aware of circumstances of very significant importance before the report is delivered, the need to amend the report may be discussed

• In the opinion of the IDW, it can basically be assumed that the consequences of the coronavirus pandemic for the balance sheet or valuation are only to be taken into account in financial statements with a reporting date after 31 December 2019.

Value-based facts through COVID-19 effects

Impact of COVID-19 on reporting by investment funds

Actual information on our RE Blog:https://blogs.pwc.de/real-estate/

ESMA publication:

IDW publications:


PwC

Immediate tax law measures in practice



Reactions in Germany

• Immediate measures by the Federal Government and the federal states: in particular deferral, adjustment of advance payments, suspension of enforcement measures for taxpayers who can be shown to be directly and significantly affected

• Good experience in practice, i.e. rapid implementation by the tax authorities

• Technical transmission of applications by fax and e-mail

Federal measures Federal states measures

PwC

Taxes - New announcements of the BMF in connection with COVID-19

• Questions and answers on the tax relief granted by the BMF in connection with COVID-19 and with regard to external tax audits and wage tax deduction.

• General information on how to deal with the questions that arise, whereby the decision in individual cases is subject to the tax offices, the local authorities or other contact persons.

• Special payments to employees up to 1,500 euros are tax and social insurance free.• This covers special benefits which employees receive between 1.3.2020 and 31.12.2020 and which are paid in addition to the wages owed

• Special regulations planned for “cross-border commuters” (Grenzgänger) - bilateral special regulations to avoid an unintentional change of the right of taxation through home office activities.

29

FAQ "Corona" (taxes) of the BMF

BMF letter of 9.4.2020 - Tax relief for grants and subsidies

BMF letter of 9.4.2020 - Investment tax measures to consider the economic consequences of the COVID 19 pandemic

BMF letter of 9.4.2020 - Tax measures to promote aid for people affected by the Corona crisis


PwC

Taxes - further relief vs. start of refinancing measures?

30

Supplementary budget of EUR 156 billion in Germany

• Capital levy (SPD; Left Party) • Contribution of the real estate industry?

− Property tax increases − Land transfer tax ("unconfirmed" rumour: new share deal

regulations, participation limit 75%, 10 years holding period etc.)

• Abolition of the solidarity surcharge retroactively as of 1 January 2020

• Tax cuts, e.g. also income tax (Markus Söder)

Tax relief Possible refinancing measures


PwC

.

Your questions to the PwC experts

Regulatory Update

Scenarios

ESG

Tax Update



Thomas VeithPartner, PwC Real Estate Deals Leader [email protected]

Christiane Conrads LL.M.Head of German Real Estate Desk, London [email protected]

Thorsten SchniedersPartner, PwC Real Estate, [email protected]


Eva HandrickPartner, PwC Real Estate Assurance, Germany [email protected]

PwC

PwC information on COVID-19 and its impact on the real estate industry can be found here:

Current information about Real Estate and also COVID-19https://blogs.pwc.de/real-estate/

Central email address for questions to PwC experts on [email protected]

Weekly expert session via WebCast on current topics always Wednesday 10:00 to 11:00

PwC Plus - All the information about real assets with push message functionhttps://pwcplus.de/



https://pwcplus.de/

PwC

PwC COVID-19 Services

• Experienced, interdisciplinary team (Legal, Tax, Operations, Financials)• Pragmatic and efficient project approach• Possibility of short-term support and 'Ready-to-Go' support with a proven

IT communication platform

PwC COVID-19Real Estate Taskforce

Operations• Management of the tenant and service

portfolio• Support in daily business• Crisis Management

Scenario Analysis• Development of scenarios for dealing

with the COVID-19 crisis• Changes in the business model to

ensure sustainable cash flows

Liquidity/Financing• Monitoring the liquidity status• Review of the loan portfolio• Support review grants and loan options• Dealing with tax deferrals

Strategic Impact• Expansion of IT systems & digitization• Further development of the value chain,

business model & assets• ESG implementation

PwC E-Mail COVID-19 Expert Contact:[email protected]


COVID-19 Impact on Real Estate

Weekly PwC Expert Session via WebCast

29. April 2020 von 10:00-11:00 am

Registration via Link or via E-Mail: https:/www.pwc-events.com/Covid-19-Impact-Real-Estate




Buildings need to adjust to their occupier needs and changing regulation – certification/rating is key

Climate for REAL Change - ESG Impact on Value

Area consumption

• Development of brown fields instead of green fields

• Redevelopment of existing buildings

Design and Construction

• Sustainable design, materials and construction

• Efficient building (energy, water and waste)

• Protection against unique events

Building operations

• Integration of renewable energies

• Low level of consumption and small carbon footprint

Building certification

• Certification provided rating and allows for comparison

• Growing number of investors and tenants require certification

Buildings interact with tenants, staff and their environment

Occupier health and safety

• Ensure well-being of tenants

• High flexibility (e.g. co-working) and accessibility for all persons

• SMART building

Mobility concepts

• Broad access to public transport

• Support of various mobility concepts (e.g. e-mobility, bicycle)

Interaction with environment

• Interaction between building and surroundings (inclusion and accessibility)

• Strengthen neighbourhoods and interactions

ESG compliance requested by tenants and stakeholders –action required to create increased value from ESG

Social / governmental responsibility

• Fair treatment of employees/contractors during construction and operations

• Good Governance• Tax strategy• Fight money laundering

Increase rental income and occupier satisfaction• Certified buildings allows higher rental income• Operating costs can be an offsetting factor (new technology, management)• Satisfied occupier as building serves them better

Decrease yields, capex requirements and rental loss• Buildings compliant with ESG show lower yields (i.e. higher sales prices)• Compliant buildings are designed for the long term and need less capex• ESG compliant buildings have a lower risk of vacancy and rental loss

Create higher social acceptance• ESG compliant buildings fight climate change, reduce resource

consumption and have a lower carbon footprint• Good governance, treatment of employee and interaction with its’

surroundings provide social acceptance

Dirk [email protected]

Dirk [email protected]

Thorsten [email protected]

Johannes von [email protected]

Daiane [email protected]

Factors impacting marketability and value Factors impacting marketability and value

Our services for YOU to master REAL change in value

Creating value through ESG compliance

• Helping you to create additional value for your real estate assets• Cost optimization• Elevate existing ESG

potentials• Identify valuable ESG

measures

Measuring the impact of ESG on your

valuations

• Review existing real estate valuations

• Prepare valuations taking carefully into account all relevant ESG criteria:• Reflect all specifics in

valuation• Statement regarding

ESG compliance of your assets

Assessing the status of your real estate

• Reviewing existing rating of your real estate assets / portfolio

• If no rating or certification is in place:• Quick-ESG rating -

analysing key ESG factors

• If requested: advice you during certificationHow to assess, measure and create the optimal return

on ESG investments?

1 2 3

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© 2020 PricewaterhouseCoopers GmbH Wirtschaftsprüfungsgesellschaft.Alle Rechte vorbehalten. "PwC" bezeichnet in diesem Dokument die PricewaterhouseCoopers GmbH Wirtschaftsprüfungsgesellschaft, die eine Mitgliedsgesellschaftder PricewaterhouseCoopers International Limited (PwCIL) ist. Jede der Mitgliedsgesellschaften der PwCIL ist eine rechtlich selbstständige Gesellschaft.

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COVID-19 Impact on Real Estate - PwC Blogs...Apr 22, 2020 · Real estate markets • Asset classes • Real estate player • Real estate value chain. In the market has also arrived: