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COVID-19: Lessons from the GFC as investors ponder coronavirus impact

Covid19 lessons from the GFC  hero

Hunt for yield may be even more pronounced

While the global economic turmoil wrought by Covid-19 is unlike anything in recent memory, commercial property experts say there are still lessons to be learned from the GFC.

Richard Kirke, International Sales Director at Colliers International in New Zealand, says the hunt for yield could be even more pronounced following the current crisis.

But right now, the fast-changing situation makes forecasting extremely difficult.

“The world’s markets are extremely volatile as investors struggle to form a view on the economic consequences of Covid-19.

“At the same time, investors, occupiers and real estate advisors are trying to gauge the impact on the commercial real estate sector.

“None of us can tell exactly how this will play out, but some certainties have already emerged.”

Here’s what we know:

  • Freedom of movement has been significantly impacted globally;
  • As a result, the tourism industry globally is at a standstill and many companies will not survive, including some hotel chains and airlines;
  • Retail is an equally hit sector;
  • Governments have been quick to inject cash in a desperate attempt to support ailing economies;
  • Interest rates are at or near zero in many of the largest economies;
  • Banks will work with existing clients only;
  • Many tenants are unable or unwilling to pay rent;
  • Interestingly, in an environment where cash is king, there has to date not been a rush of redemptions from open-ended real estate funds.

Kirke says New Zealand’s commercial property sector is likely to look very different when Covid-19 is in the rear-view mirror.

“Whilst accepting this economic downturn is different to anything in recent memory, there are still lessons to be learned from the GFC, and SARS in Asia.

“A key observation is that a significant amount of cash created by quantitative easing ended up in real estate as investors chased yield. This has the potential to be even more pronounced following this downturn.”

The following represents our collective thinking for the post-Covid real estate sector:

  • Public debt will be a burden for years to come;
  • Interest rates will stay at near zero for a significant period;
  • Many businesses will be smaller;
  • Tenant covenants will be a key consideration;
  • Consumer spending will be slow to recover;
  • Governments will continue to take measures to stimulate economies;
  • Occupier demand will continue but likely to vary across the sectors; for example, the move to online shopping is likely to have been accelerated by Covid and this change is unlikely to reverse post-virus.

Peter Herdson, National Director of Colliers’ Capital Markets team, says investors are likely to chase those asset classes least affected by the market turmoil.

“Industrial will be a standout; distribution centres will be particularly sought-after as online shopping becomes more prevalent. The premium office market will also maintain strong demand.”

Herdson says tenant covenant is likely to become even more of a key consideration than previously.

“Investors will look for essential services tenants to safeguard rental income against the impact of possible future pandemics.

“Large corporates with the cash reserves to ride out similar crises in future will also be highly sought by investors.”

Greg Goldfinch, Industrial National Director at Colliers, says a new tenant covenant rating of A++ is likely to arise post-Covid.

“These A++ tenants will be businesses that have proven to be pretty much recession proof.”

Goldfinch says investors will likely still see the industrial sector as a ‘safe haven” and will pay handsomely for premier offerings.

“Industrial investors will seek A++ tenant covenant – thereby ensuring their cashflow is secure for the term of the lease – as well as long leases and sound underlying real estate.

“Whilst there will be some increased vacancy, it will potentially come as a welcome relief to the sector given vacancy rates have been sub-2 per cent and occupiers have had very few options if they are looking for new premises.

“Consequently, we will also see less spec build activity as developers and owners are capital constrained and more risk averse.”

Herdson says savvy investors will still find plenty of opportunities to build strong portfolios in the post-Covid global economy.

“Long-term strategic thinking, combined with the flexibility to pivot and adapt at speed, will be crucial.

“Those investors who are already in discussions with their trusted property advisors will be in the best position to seize the opportunities to come.”

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Richard Kirke

Director | Capital Markets


Richard is responsible for the promotion of New Zealand property to international investors, leveraging of his relationships developed in executive positions during his near 8 years in Hong Kong, as well as assisting to grow the company’s nationwide Rural and Agribusiness agency capability.

Richard began his real estate career in 2004 with CBRE, in the five years he spent with them (before leaving to run Colliers Hong Kong business in 2008) he was involved in many notable transactions including the sale of the Lion Nathan site in Newmarket for $162m, the sale of the GE & BNZ Britomart properties on behalf of Manson’s to the German fund HIH and portfolio sales, including the successful auctioning of 16 National Bank Branches across New Zealand.

During his time as MD of Colliers Hong Kong he was involved in the sale of 50 Connaught Road on behalf Apollo Group (a New York based Hedge Fund) to the Agricultural Bank of China for $US632m.

Richard was the Managing Director of Colliers Hong Kong office for six years from 2009-2014. During this time he was an active participant in several high value transactions and developed broad relationships with both Asian investors and colleagues across the region.

In late 2014, Richard agreed to run CBRE’s Asia Pacific Capital Market business, including their Capital Advisory (Real Estate Investment Banking) business, this further added to his knowledge of real estate investors, particularly in greater Asia.

As a senior executive of Colliers for 6 years in Hong Kong, Richard has strong personal relationships with Colliers personnel across the globe.

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Peter Herdson

National Director | Capital Markets


In 1993 Peter returned to New Zealand from the United Kingdom with several years’ experience in property management and development. During this time, he worked for Vanson Developments (Richard Branson´s property development company) for two years, and in investment and management for Fuller Peiser (Rolls Royce and Vickers Pension Funds). Upon his return to New Zealand, Peter joined Colliers International (NZ) Limited, where he has been ever since.

Peter now leads the Colliers International Capital Markets division, based in the Auckland CBD. The team is proud to have established a new approach to collaborative working within their division, a first the New Zealand marketplace. 

The “Power of Five” approach with the Capital Markets team has driven exceptional outcomes for client service since 2007. The team has adapted a charter unique in the market, with over 100 years of combined experience. The personal and professional networks of 5 directors operating as a cohesive team across all projects, provides maximum leverage and market coverage for our vendors. It ensures an acceleration of all our clients success.

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Greg Goldfinch

National Director | Industrial

Auckland South

Greg specialises in the mid to upper end of the Industrial sale and leasing markets. He joined Colliers International in 2004, coming from a policing background. He quickly established strong relationships within the industrial market and has worked exclusively for the likes of Fisher & Paykel, The Warehouse, Freedom Furniture, Fletchers, NZ Police, NZ Guardian Trust, Goodyear Dunlop NZ Ltd and Mercedes-Benz to name a few.

Greg has been the lead broker on nearly all of the largest transactions in the industrial property market over the last ten years. Greg has completed three of the largest industrial sales ever in the New Zealand market. He is a regular top 10 broker for Colliers across NZ having transacted in excess of $6billion worth of industrial real estate in his time with Colliers.

In 2013, 2019 and 2020 Greg was awarded the Commercial and Industrial Salesperson of the Year Award by the Real Estate Institute of New Zealand and was runner up in 2018. Greg was Colliers International’s top salesperson in New Zealand across all sectors in In 2010, 2013, 2017, 2018, 2019 and 2020.

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