Savills IM prefers long-lease income in 2020

Savills Investment Management (Savills IM) prefers long-lease income streams in 2020 instead of value-add and opportunistic strategies that depend on economic and strong employment prospects.

At the current late stage of the investment cycle, the outlook for pan-European occupier markets is weaker than it has been for some years. Various forecasters expect economic growth to remain subdued over the next 12-18 months as global demand loses momentum and several geopolitical risks remain unresolved. Nonetheless, Savills IM’s 2020 Outlook highlights that opportunities remain in the office, retail and logistics sectors, but investors must be mindful of asset location, structural changes and resilient formats, among other characteristics.
Andreas Trumpp, Head of Research, Europe, at Savills IM, says: “At this point in the cycle, we are seeking long income streams. We prefer CBDs, fringe-of-CBDs and central city locations where buildings are located close to good transport infrastructure. Markets where modern, efficient office space is in short supply can also provide some interesting opportunities. Multi-let assets with short lease lengths in central locations provide opportunities for rental growth via active management.
“Retail assets that cater to the shopping experience, such as outlet centres, or convenience shopping formats such as retail parks – which have limited nearby competition and are easily accessible to large population catchments – look attractive, too.
“Accessibility to main transport networks and labour are crucial ingredients in the logistics recipe. As such, we like large modern distribution warehouses that are close to main transport networks as well as smaller urban facilities within, or nearby, large and high-density cities.”