| Light at the end of the lockdown 2.0 tunnel?
With Boris Johnson having finally deployed his 'nuclear option' of a second national UK lockdown, there could be more pain ahead for the embattled real estate market. This week's newsletter focuses on the state of play in various sectors of the property market and the ongoing impact of the pandemic.
New research from eVestment reveals that US, UK and Canadian pension funds still have long-term Covid-19 concerns when it comes to real estate and real asset investments, with Q3 commitments down 50 per cent on the same period last year. By comparison, pension fund commitments to private equity and private debt are up by 12 and 21 per cent respectively.
Colliers International meanwhile, says that while UK commercial real estate (CRE) investment volumes are down by roughly 20 per cent for the first nine months of the year, investors seem to be returning to the market with GBP4.4 billion transacted in September – the highest monthly figure since March and the start of the first nationwide lockdown.
And new research from Aviva Investors suggests that institutional investors will increase their exposure to real assets over the next 12 months, with real estate long income the preferred asset class for both insurers (54 per cent) and pension funds (45 per cent).
"With central banks looking set to keep base rates low for the foreseeable future, our expectation is that institutional investors will increasingly turn to real assets for yield, returns and diversification," says Mark Versey, Chief Investment Officer, Real Assets, at Aviva Investors.
The flexible office sector may have fared better than other commercial property segments during the pandemic and but as the latest research from Instant Group highlights, Covid-19 has brought about change. City centre demand is down while some suburban markets have seen significant growth.
“This year has proved extremely challenging but there is a very palpable sense of significant change in the future of the office market," says John Duckworth Head of UK and EMEA at the Instant Group. "The future looks to be considerably more agile, which will ultimately play to the strengths of the flex sector."
According to a new report by Savills, there are reasons to be cautiously optimistic about the hotels sector too, despite the devastating impact of the coronavirus crisis on the travel sector as a whole. European hotel occupancy rates grew to 38.6 per cent on average in Q3 2020, representing a marked improvement on historic lows of 15.3 per cent recorded at the height of the pandemic.
Tim Stoyle, Head of Savills Hotels Team, EMEA, says: “A second wave of the pandemic across the continent will continue to create further headwinds for the hotel industry but opportunity funds are targeting the sector and selective value-add and development projects are continuing to attract debt and equity funding.”
Travel restrictions have impacted the prime central London (PCL) residential market too, according to London Central Portfolio with the firm revealing that over 20 per cent of PCL properties are now being bought 'site unseen' by overseas investors.
"With the significant increase in purchases made via virtual viewings and evidence of pent up demand, 2021 may well see the beginnings of a rally in prime London similar to post Global Financial Crisis, where prices increased by 61 per cent between March 2009 and September 2012," says Andrew Weir, CEO of LCP.
Property Funds World
|
