2019 IS COMING TO AN END

Another year of (un)predictable political events, of an (un)anticipated economic slowdown, of (un)expected extreme weather conditions and for European real estate another year closer to the hard-to-predict peak of the investment cycle. 2019 was once again characterised by high competition for prime assets, ever so low(er) yields and high flows of capital in real estate.

According to Oxford Economics the global economy will continue to slow in 2020 with a 30% probability of a global recession. Uncertainty, particularly over tariffs and Brexit will continue to be a drag on business investment in Europe. While ECB monetary policy has helped financial conditions, expansionary fiscal policy is now required from governments to boost demand. GDP growth in the eurozone is forecast to reach 1.2% pa this year and slow down to 1.0% in 2020.

In this context of low interest rates and low cost of debt, property will continue to offer better returns compared to other assets, despite the fact that prime yields are at record lows and have fallen even below 3% in some core markets. In this publication we look back at our 2019 hypotheses and we provide our predictions for the European property themes of 2020.

2020 EUROPEAN HOT SPOTS

TOP PICKS FOR CORE / CORE+

• Prime CBD and well connected non-CBD offices in cities with solid occupier demand and low vacancy such as Berlin, Paris, Munich, Dublin and London, Good rental growth prospects in Madrid, Barcelona, Stockholm, Amsterdam, Oslo, Luxembourg and some further yield compression in Milan and Warsaw.

• Logistics assets in strategically located areas with demand and supply imbalances and rising e-commerce penetration in Germany, Netherlands, Poland and Czech Republic.

• Residential for rent (multifamily) in countries with strong urbanisation trends and housing shortages such as Stockholm, Helsinki, Copenhagen and in the top four Dutch cities, for secure long term income streams.

TOP PICKS FOR VALUE-ADD

• Office development and refurbishments in CBD and non-CBD locations in cities with strong fundamentals such as Stockholm and Paris and smaller markets such as Luxembourg, Lisbon.

• Retail repositioning of good quality schemes in mature retail markets such as the UK and Germany.

• Hospitality in tourist destinations with rising visitor numbers such as Italy, Portugal, Greece.

TOP PICKS FOR OPPORTUNISTIC

• Repriced secondary retail schemes for redevelopment/repurposing in countries where e-commerce has impacted retailer demand.

• Office development in non-core, higher yielding cities such as Athens and Bucharest.

_{Read the articles within Spotlight: EU Property Themes 2020+ below.}