Real estate is generally still seen as one of the few investment asset classes to generate acceptable returns at a time of low or negative interest rates. However, the pandemic has forced millions to work from home, closed retail stores and accelerated structural changes impacting three mainstay sectors of the real estate world – office, retail and hospitality. 2020 poses immediate challenges to the security of income from these sectors. Uncertainty has shifted priorities within the sector; this year’s market beneficiaries include assets operating in areas which have been minimally disrupted. Logistics and housing are particular beneficiaries, with data centers, life sciences buildings, energy infrastructure, and industrial property or warehouses benefitting from relatively stable demand. Communication towers/fiber have also benefited as life continues to shift online.
Amplifying this domestic focus, is the clear expectation that we will see a deals-led recovery with ample opportunities emerging over 2021 within domestic markets without perhaps having to venture overseas. The prioritization of stability has also helped Germany gain favor, with Berlin topping the city rankings this year. The relative health of Germany’s economy, combined with its effective handling of the virus, has helped the country through this period. a growing focus on environmental, social and governance concerns, including net zero strategies and diversity and inclusion. These topics feature prominently as part of an ongoing re-evaluation of real estate’s place in society and how it impacts the very fabric of how people live, work, consume and spend our leisure time. The pandemic has reinforced the importance in the minds of many industry leaders of the need to consider how the sector can reduce its carbon emissions, and the importance of the ESG agenda in general.