Covid-19 forces Credit Suisse to pause deal, with proptech unable to help

The impact which lockdown measures against Covid-19 are having upon transactions has been revealed by Credit Suisse’s global head of real estate.

Christoph Schumacher said the global wealth manager was recently forced to pause the acquisition of a property in the Asia-Pacific region, due to being unable to perform due diligence on the asset by visiting the site and that technology was unable to fill the gap.

Speaking at an open forum hosted by Credit Suisse, Schumacher said: ‘[Asset] prices have fallen, quite simply because it is impossible to perform a proper valuation of the assets and carry out adequate due diligence in a lockdown environment.

‘There is a limit to the extent of the analysis we can carry out remotely and the majority of the due diligence process has to take place on the ground. We have already had to postpone one intended acquisition in Asia as a result of these limitations.’

Strict social distancing rules imposed early by governments are among measures which helped countries in the APAC region to reduce the number of coronavirus infections, compared to Europe and the US. 

In the absence of ‘on the ground’ visits to buildings, some are looking to proptech such as virtual reality tours and livestream marketing to perform essential tasks such as valuations, particularly in the residential market.

But despite the industry’s efforts – particularly in China – the market has ground to a halt, reports Reuters.

The coronavirus crisis has also triggered debate about the future of offices, an asset class Schumacher said is part of Credit-Suisse’s ‘core business.’

He said he expects ‘less new supply’ in the near future, but that the fundamentals of the segment remain attractive – and for real estate in general.

‘We believe that, in addition to low vacancy rates and resilient yields, the sector benefits from the structural support of low interest rates and supply constraints in these circumstances. We expect less new supply in the markets in the near future,' said Schumacher.

‘We believe there is some pent-up demand for real estate among certain investor segments, especially private bank clients who wish to secure their portfolios with a larger allocation to real estate as a safe haven in uncertain times.

‘Finally, real estate is both a valuable portfolio diversifier, because of its low correlation with other asset classes, and a diversified asset class in its own right, as geographical, regional and sectoral influences affect performance in different ways at different times.’

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