The real estate service provider Savills has determined which properties will also offer interesting investment opportunities in 2021.
“We assume that the space requirements of the individual uses will differ quantitatively and qualitatively in some cases substantially from those in spring 2020 even after the end of the pandemic,” says Matthias Pink, Head of Research Germany at Savills Press release published on the company’s website.
More logistics space – at the expense of retailers
According to the press release, the COVID-19 crisis could prove to be a “transformation accelerator” for the real estate markets – with long-term consequences. Because, as Matthias Pink explains in the press release, a clear trend can also be seen for the time after the COVID-19 pandemic: The demand for logistics space will continue to increase significantly, while the demand for decentralized retail space will continue to decline.
This development of the changed space requirements of real estate meets a “short-term unchangeable building stock”, which is why an increased demand for new construction, modernization and renovation can be assumed for the next few years. After all, today’s buildings in their current form have to be adapted to the changing needs of the market, including the necessary devices.
Further increasing real estate quotas among institutional investors
According to Marcus Lemli, CEO Germany and Head of Investment Europe at Savills, this trend can also be seen in the investment market for real estate. In this regard, he anticipates a stronger concentration of demand on real estate in those segments that have been able to record stable cash flows despite the pandemic and that promise to do so for the post-pandemic period. This includes, above all, logistics and residential properties, food retail properties and offices in good locations with long leases and users with good credit ratings. Returns outside this “core segment” are likely to rise at least until the end of the pandemic. Due to the strong yield advantages of real estate over bonds and the low interest rate environment that will likely continue throughout the 2020s, Savills expects “real estate quotas to continue to rise in the portfolios of institutional investors,” said Marcus Lemli in the press release.
Logistics properties as darlings of investors
The trend recorded in the press release coincides with the results of a survey that Savills carried out as part of the market outlook for 2021, the results of which were published on the Savills Investment Management website. From this survey, too, logistics properties emerged as the winners in terms of investors’ favorite sectors. 57 percent assume increased investment activities in large distribution centers and 55 percent assume increased investment activities in urban logistics properties of the last mile. In addition, 80 percent predict increasing or stable transaction volumes for real estate in the food retail sector.
59 percent of the property investors surveyed expect the European property markets to recover in 2021, which, according to 52 percent, will occur between the second and fourth quarters. Around 45 percent of investors expect higher transaction volumes on the real estate market within the next twelve months, a quarter of those surveyed assume that the level will remain the same. In addition, investors in the outlet mall segment in Western Europe can expect attractive, risk-adjusted returns, according to Savills Investment Management in the market outlook.
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