The most successful investors in European property in 2021 will be those that can be active on both sides of a growing chasm between logistics and residential, and retail and offices, according LaSalle Investment Management’s annual investment strategy outlook.
The fund manager said that while shed and bed assets were benefiting from a number of compelling secular trends including e-commerce growth, urbanisation and a growing investable stock, investors must choose assets carefully to avoid overpaying in these highly competitive segments of the market.
While retail and offices may be out of favour in the current climate, LaSalle said that the importance of in-person collaboration meant the overall depth of tenant demand for high-quality office space in accessible locations would remain strong and, in retail, the fund manager said it expected to see the bottom of the cycle for prime retail pricing this year. Retail in residential areas that delivers for everyday needs would remain a resilient investment going forward, said LaSalle.
Head of European research and global portfolio strategies Brian Klinksiek, said: “The trends driving the growth in the logistics and residential sectors have only been accelerated by the pandemic. With concerns about the future of offices adding to longer-standing worries about retail, ‘TINA’ (There is No Alternative) has joined ‘FOMO’ (Fear of Missing Out) as reasons investors are targeting European ‘sheds and beds’.
“This has created a chasm between logistics and residential on the favoured side of a great divide, and office and retail on the unfavoured side. In our view, the investors in European property that will be most successful in 2021 will be those who can be active on both sides of the chasm.”
In terms of lending, LaSalle said it remained bullish for the private debt market, as traditional lenders continue to favour core, stabilised assets with lower loan-to-value ratios. Mezzanine, higher-leverage whole-loan strategies and transitional financing will also likely play an increasingly important role in the liquidity of the real estate market, said LaSalle.
To send feedback, e-mail samantha.mcclary@egi.co.uk or tweet @samanthamcclary or @estatesgazette
