Hard-hit Europe adjusts fastest but sector ranking unchanged
Although the whole world is currently facing the same challenges – such as rising interest rates and high inflation – and everybody is adjusting accordingly, the degree to which that is needed is very different depending where in the world one is located, says Nuveen’s Stefan Wundrak.
Wundrak, the firm’s head of European real estate research, explained that Europe has been hardest hit because it has experienced the highest inflation. “We also have probably a deeper recession than in other places in the world, so the adjustment has been much quicker and much deeper in Europe,” he added.
While in Asia inflation is under control and interest rates have increased only slightly, the market is flat lining rather than having a proper reset. The US sits between these two extremes, Wundrak said
“The favourite sectors are still the same, because they are driven by structural factors,” he said. In particular the housing crisis with a lot of demand for residential to rent.
“And there’s lots of demand still for logistics space, and obviously we’ve seen a bit of a reset around offices where the pandemic changed the dynamic a bit.”
Wundrak adds that Europe’s office market is not experiencing the office reset to the same degree as the US, where many companies have not really returned to the office.
“In Europe, we are more like the Asia Pacific, where most people work flexibly but work most of the time still in offices,” he said.
Retail is, however, is still going through its transition.
“It’s probably close, finally, to bottoming out on rents and pricing but the hierarchy hasn’t changed: residential, logistics and alternatives on the top, offices in the middle, and retail still least favoured.”
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