Green shoots evident but real estate recovery remains patchy
Following a difficult year or so, there are definite signs of an upturn in the fortunes of the global real estate market, but the green shoots of recovery are patchy and are likely to remain so throughout 2021, according to new research out this week.
Colliers' latest EMEA Markets Snapshot Capital Markets Q1 2021, highlights 'strong momentum' in the industrial and logistics sector, plus the living sector in the Nordics, Italy and CEE, and also a return of positive sentiment to the UK's student housing market. Investment volumes in large scale European office transactions however, have slowed, with many countries seeing overall activity halve in comparison to Q1 2020.
Richard Divall, Head of Cross Border Capital Markets, EMEA at Colliers, says: “The industrial and logistics sector continues to thrive with falling yields in almost all markets and premiums being paid for portfolios. Investors are willing to go up the risk curve in this sector, although some investors are showing initial concerns to pricing and whether developers will push rents far enough in a falling yield cap rate environment.”
The research team at Edmond de Rothschild meanwhile, is predicting differences in momentum between the four main real estate sectors – rental residential real estate, retail, offices, and industrial and logistics – to persist during 2021, despite the expected recovery in European economic activity in general providing more support to commercial real estate markets.
Non-listed real estate investment managers, managed to raise EUR123 billion in 2020, according to the Capital Raising Survey 2021, published by ANREV, INREV and NCREIF. Although someway short of the record EUR196 bullion seen 2019, INREV CEO Lonneke Löwik sees this achievement as a mark of the sector's enduring appeal with investors. "The fall in the level of capital raised in 2020 compared with the record-breaking achievement of 2019, obviously reflects the impacts of Covid-19," she says. "However, this research also highlights a clear sign of continuing strong investor appetite for non-listed real estate, a positive outlook on future capital raising activity among investment managers, and a general expectation that new products will emerge."
In a sign that there could be better times ahead for the UK retail sector, Shaftesbury, a Real Estate Investment Trust which invests exclusively in the liveliest parts of London's West End, reports that footfall has returned to 86 per cent of the peak in December in 2020, just before London was placed into its third lockdown.
Staying in the West End, Hines has secured planning consent from Westminster City Council for a flagship mixed-use retail and office scheme with dual frontage to both 80 New Bond Street and 325 Oxford Street. As well as a significant retail presence at ground and first floor level, the scheme will provide a total office area of 31,000 square feet NIA (Net Internal Area) with floorplates ranging from 3,000 to 6,500 square feet NIA, and a large communal roof terrace of 1,100 square feet.
It's not all positive news for the UK commercial real estate sector though, with a new study by Remit Consulting suggesting that landlords are facing a further significant shortfall in rent collection over the current fiscal quarter, despite the easing of Covid-19 restrictions.
“If the collection rates continue on the same trajectory, then the market is on course for a further substantial shortfall in income this quarter and the figures remain about 30 per cent below those experienced in the equivalent, pre-Covid, Quarter of 2019," says Laura Andrews of Remit Consulting.
And finally, a new study by Octopus Real Estate reveals that there could be as many as 2.5 million UK retirees considering moving to retirement communities with the Covid-19 pandemic having highlighted the benefits of community living.
"The opportunity in the UK for retirement community operators, developers and institutional investors to come together to create more choice for retirees is clear and in so doing we can play our part in helping to build back better,” says Kevin Beirne, Director, Head of Retirement, Octopus Real Estate.
Property Funds World