Investors believe European Real Estate Market should start its recovery in 2021

Investors believe European Real Estate Market should start its recovery in 2021

This was the answer provided by 59% of the 122 institutional investors surveyed by Savills IM in October, representing around 21.11 billion euro in real estate investment. Within this group, there are those who consider the recovery is already happening (more than 10% of these investors). On the other hand, more than 20% of the players inquired believe the recovery will only start during the first quarter of 2022 or later. And less than 3% believe that this market will never fully recover.

On the levels of investment, one in four believe they should remain the same, whereas 30% consider these will lower. 45% of investors expect real estate investment to grow in the coming 12 months since there are several opportunities waiting.

«Real estate investors are confident about 2021, and recent positive announcements about the availability of a vaccine could certainly accelerate the recovery, boost sentiment and help cross-border investments to flow again», assumed Andreas Trumpp, Head of Research, Europe at Savills IM.

2021 should offer «attractive investment opportunities»

The European real estate market should offer « attractive investment opportunities in 2021 as investors regain confidence following the COVID-19 crisis», revealed the latest Savills IM’s 2021 Outlook report, titled "Building resilience in global real estate portfolios". These opportunities should mostly appear in the central business district (CBD) offices, supermarkets and food-anchored retail parks as well as logistics assets in key locations.

In terms of the office segment, the report envisages no major demise of the office segment despite the increase in agile working driven by the pandemic, and it assumes that «the offices in CBD locations with good transport links are here to stay». In terms of retail, the report highlights that the resilient income streams of food retail assets represent a strong buy for core/core-plus investors. Logistics, which has been a clear winner throughout the pandemic because of the increase in online shopping, will continue to be backed by solid fundamentals and structural tailwinds, the report emphasises. But the report also warned that with returns on traditional property assets – office, industrial and retail – low, investors will also be looking into alternative sectors such as student housing, build-to-rent accommodation and senior living.

«The pandemic has clearly caused multiple disruptions in the economy and the commercial real estate markets. Nevertheless, in seeking new opportunities, investors should embrace the structural trends that have accelerated because of COVID-19», predicted Andreas Trumpp.

Spain will only return to pre-Covid levels in 2023

Despite Spain being one of the countries offering investment opportunities next year, recovery to pre-Covid levels is not expected within the next 2 years.

It was Fernando Ramírez de Haro, managing director at Savills IM for Spain and Portugal who said so, and he assumed that «the Spanish real estate market offers clear investment opportunities, despite the high levels of unemployment and public debt representing a risk in terms of economic prospects and the fact that the recovery to pre-Covid levels is not expected until 2023».

Nevertheless, Fernando Ramírez de Haro recognised that in Spain «as within the rest of Europe, logistic and office investments represent a clear long-term alternative and, at the same time, food retail and supermarkets are showing their resilience as prime assets. Investment in PRS (Private Rental Sector) will continue growing in the Spanish market in 2021», he assured.

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