The mood is optimistic as investors, asset managers and lenders look at the second half of the year, experts agreed at Real Asset Media’s European Outlook H2 Investment Briefing, which took place online on REALX.Global yesterday.
“We see signs of normalisation and all the data coming through are reassuring,” said Iryna Pylypchuk, director of research and market information, Inrev. “The big picture from fund managers on where we are as an industry is positive. Investors are regaining their confidence and there is a lot of capital waiting on the sidelines.”
In the last two quarters the use of material uncertainty clauses has collapsed to 18-20%, she said, which is a clear sign of confidence coming back to the market. On a global level, 9.3% of AUM are set to be deployed in real estate, which is a lot of dry powder.
“There was no meltdown in H1 2021, in fact we’ve had three successive quarters of capital growth,” said Andy Watson, partner, Europa Capital. “Rent collections have not been as bad as feared and JLL shares, which are a proxy for the global health of the property business, are at $200.”
The worst fears did not materialise, despite the upheaval, because this was not a financial crisis.
“People have realised that it wasn’t a normal recession but a different kind of crisis which, as it turns out, was not as bad as expected,” said Marcus Cieleback, chief urban economist, Patrizia Immobilien.
Average gearing is now 23-24%, compared to 40% pre-GFC, so there is less stress in the market because lessons have been learnt.
Better outcome than had been expected
“A year ago we were preparing for the worst, but luckily things have turned out to be better than expected,” said Assem El Alami, head of international real estate finance, Berlin Hyp. “In the end, 2020 was good and 2021 has been very good so far. As a lender, we feel quite comfortable. We continue with our risk strategy, we’re ready to provide funding, we’re open for business and active in the market. I don’t see our competitors pulling back either.”
In Europe, GDP growth was normal, at 0.6-0.9% on average, with the exception of the UK. The economic situation was easier largely thanks to low interest rates, which reduced the pressure.
London is an international market so it suffered because of the travel restrictions,” said Jessica Hardman, head of European real estate portfolio management, DWS. “But there will be renewed interest from investors as soon as the country opens up again, thanks to the vaccination programme. I see a definite bounce-back on the horizon.”
By the end of the year the UK economy will have recovered its strength and the real estate market will follow, she said.
“We see the beginnings of a bounce-back in London, both in core and developments,” said Philip La Pierre, chief executive officer – Europe, LaSalle Investment Management. “The yield spread is attractive and prospects for the market are strong.”