M&G Real Estate's Global Outlook Report forecasts continued uncertainty as the 'new normal' for commercial real estate
The impact of Covid-19 is significantly reshaping the way in which investors are thinking about the long-term future of the global real estate sector, according to the latest Global Outlook Report by a leading global financial solutions provider for real estate investors, M&G Real Estate.
The findings reveal how the pandemic is causing investors to grapple with significant, unforeseen economic upheavals and the major shifts in work/life balance, which may in time force investors to repurpose their assets. It also highlights the potential widening gap between sustainable and ‘stranded’ assets. Issues such as social equality and climate action are impacting business models more strongly than ever before, particularly with the aspirations of many governments to achieve net zero carbon emissions in the coming decades.
The report suggests that the world has moved towards an increasingly risk-off environment during 2020 to such an extent that uncertainty in the markets is becoming the ‘new normal’. At the same time, as bond levels and interest rates remain low across the UK and Europe, real assets have emerged as the asset class best placed to offer a safe haven to multi-asset investors.
M&G’s research acknowledges that while many economies have started to recover from the initial impact of the COVID-19 crisis, the speed and strength of that recovery is still heavily dependent on an effective implementation of a medical solution. The findings touch upon the challenges facing governments in striking a balance between managing the spread of COVID-19 in the short-term and reducing its longer-term underlying effects on societies and economies.
The relative success of many Asian markets in managing the pandemic – underpinned by robust fiscal and monetary support from governments as well as better preparedness for a flu-style pandemic – has resulted in a generally softer economic impact than in Europe and positions the developed APAC economies for a faster recovery.
Jose Pellicer Head Investment Strategy at M&G Real Estate, says: “2020 will be known as the ‘year of the pandemic’. COVID-19 has affected economies and communities worldwide and the aftermath of such widespread impact requires a considered and targeted response.
“In many markets, the response to the virus has either accelerated or consolidated already established trends, such as an increasing acceptance of home working for those able to do so. Our attitudes towards future investment decisions must be guided by the new environment in which we are all operating and we must accept that a high level of uncertainty will continue for some time.
“We are already seeing growing momentum among investors who are keen to take a more proactive and considered investment approach in the real estate sector.”