COVID HAS RE-DEFINED RISK
During the course of our research leading up to preparation of appraisal reports we have noticed a clear trend on how risk is being re-defined. Pre-Covid, landlords were focused on rising income through rent increases. However, we have noticed the emphasis has shifted towards income security. In investment grade real estate we measure something termed the weighted average lease term "WALT". If an office building for example has a greater WALT with good collection levels (strong tenant covenants) that asset will draw investors attention notwithstanding lower income relative to other assets. If there was one statement that would summarize where investors are in the market at this time it would be that risk has been re-defined where greater value is given to sustainability as opposed to income growth.