Economic forecasts across markets are continuing to contrast and diverge; Germany may have avoided a second wave while planning for more lockdowns in Spain and the UK is underway. Navigating this changeable landscape, in addition to geopolitical uncertainty surrounding Brexit, remains a challenge for real estate investors. The crisis has seen the full suite of policy tools called upon. Of course, some major stimulus plans stood out this year – particularly Germany with its unprecedented decision to ends its no deficit, black-zero rule. The policy response has been omnipresent: governments stepped in, paying employee wages, augmenting business cash reserves, boosting bank balance sheets and legislating against tenant eviction. The tools used so far have done a seemingly good job of limiting negative outcomes, though not to the extent that was initially hoped.
Heading into the winter months, Spain and France are in the vanguard, with the UK following behind. It looks like lockdown measures are shifting from indiscriminate national shutdowns, to a localized, city- or regional-level approach. Hopefully, this will reduce the chance of wide, detrimental economic impact, which could be devastating for businesses that were struggling to get their heads above water after the first wave. investors may feel better making decisions they had put on hold. Equally, it could bring non-core real estate, such as assets with higher vacancy or in less prime locations, back into the mix longer-term. Right now, however – and this mainly applies to Europe’s major office markets – there’s a gap opening between safe, long-let core real estate and properties in need of more work. For investors to make that move, countries will need to avoid significant lockdowns and Brexit uncertainty be settled. Regardless of location, Europe’s logistics markets are firmly in vogue and have been since the early days of COVID-19 off the back of growth in grocery chain sales and online sales. There’s still a great deal of uncertainty, making it difficult to accurately price future revenue streams or indeed, value assets. This unpredictability makes price discovery exceptionally challenging. Markets have not yet corrected, but there is a correction coming.