2020 was unprecedented according to Dennis Schoenmaker, associate director, research and strategy at AEW. He said that one of the most important drivers is where bond yields are because real estate is approached from a multi-asset perspective.
Speaking to Real Asset Insight’s Richard Betts he said that the assumption is that government bond yields will be “lower for longer” because of the level of debt in economies and the absence of inflationary pressure.
“This really helps us in terms that the spread between bond yields and property yields are still at quite a high level,” Schoenmaker said.
In terms of absolute value, real estate is expensive from a historic perspective, he added. But relatively, it looks very attractive.
Looking from the occupier side of the equation, logistics and residential are “tailwind sectors” which performed well in 2020 and which Schoenmaker expects to continue. Logistics remains high on AEW’s list.
Retail has suffered because of ecommerce trends and the covid lockdowns that prevented shops from opening and values have fallen, the main exception being the grocery retail sector.
It is too early to say which way the office market will go but Schoenmaker said that he is a big fan of the sector because when people work in close proximity there is always innovation and knowledge sharing which is good for productivity.
Click on the video above to watch the full interview or listen to the podcast below.