Clearly the effects of COVID-19 will have a substantial effect of the actual investment activities of the investors involved in the survey conducted near the end of 2019. However, results from the survey will provide interesting insights in the future when examining the impact that the global pandemic has had on the non-listed real estate industry.
Clearly the effects of COVID-19 will have a substantial effect of the actual investment activities of the investors involved in the survey conducted near the end of 2019
The persistently low interest rate environment featured prominently in discussions during the roadshow and is generally seen as having a great influence on real estate markets. Investors look to real estate with risk adjusted returns that are better than bonds and don’t have the volatility of equities. However, the increased appetite for suitable real estate assets has pushed prices up and yields have fallen correspondingly. This, in turn, makes finding good real estate assets the biggest challenge to overcome and is driving a lot of real estate market dynamics.
The increased appetite for suitable real estate assets has pushed prices up and yields have fallen corresponding
Among real estate sectors, retail remains challenging for investors. It is deemed by many to be a less attractive investment due to declining rents with high vacancy rates in some locations along with lower overall demand as a result of the shift to e-commerce. The panel at the Amsterdam event agreed that retail pricing needed to come down significantly before it would be attractive. Still, retail is still seen as being interesting if good opportunities with a manageable risk profile can be identified.
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A general lack of well-priced assets (rather that investment products) was agreed in several of the panels to be a challenge. Vehicle structures generally meet investor needs but finding the right buildings at the right price is often difficult. In part this has, driven investors’ interest in the ‘alternative real estate sectors’ such as healthcare, senior housing and student housing in much of Europe, although less so in the Nordics where there is a stronger development pipeline of these assets than the rest of Europe.
A general lack of well-priced assets (rather that investment products) was agreed in several of the panels to be a challenge
During one panel, it was commented that the retail sector needs some structural change, much as the office sector has done in the past years, to adapt to changes in how and where people are shopping.
Noting a strong expected inflow of capital from Asia, the question was posed whether Asian investors have increased their risk appetite and are therefore looking outside domestic markets or whether they have become more sophisticated and experienced in real estate investments abroad. Panelists in several of the events reflected that this is a natural evolution. Many Asian investors started out with direct investment in gateway cities, particularly London, and now they’re branching out into other major European markets. The preferred route is often via funds as they seek local partners as they also seek diversification in sectors to achieve the desired returns. Korean investors have been particularly prominent in the European real estate market in the past year and survey results indicated that the trend was expected to continue.
It remains to be seen how these observations and investors’ intentions only a few months ago will be realised now that the market has been suddenly impacted by the COVID-19 crisis. While we can be sure that many challenges lie ahead for our industry, we may also find new opportunities presented in the face of this crisis that have not previously been considered. Only the weeks and months ahead will tell.