Will Global Uncertainty Bring the Real Estate Market to a Halt in 2019?

We are currently experiencing a time clouded by uncertainty; the end to quantitative easing, political risks and slowing economic growth across Europe (CBRE, ‘Real Estate Market Outlook 2019) are just some of the contributing factors.

Despite this uncertainty, the Real Estate market is expected to perform strongly in 2019.

Why the optimism?

We expect several opportunities to emerge through the fog of uncertainty in 2019. According to CBRE’s 2019 Market Outlook Report and commentary from JLL, several sectors are expected to perform well.

Firstly, Industrial and logistics, partly due to the ongoing expansion of e-commerce. Additionally, the continued growth of online food sales will increase the need for temperature-controlled city depots.

Within the residential sector, the report highlights strong growth in rents and capital values, with both the German and Dutch markets expected to perform particularly well. On average, 25% of income is spent on rent and there are still high levels of demand for housing; these are just two factors contributing to the expected growth in 2019.

Thirdly, there’s a relentless expansion in data volumes which is fuelling demand for colocation capacity across Europe. This is leading to an influx of new occupiers from Asia (particularly Cloud and Telco companies) and increased demand from US Cloud companies. As a result, the European data centre sector is expected to see strong growth.

As real estate investors execute on pan-European strategies and hunt for higher yields than traditional property investment classes offer, the alternatives segment of the market (student housing, healthcare etc.) is also expected to see growth. On top of higher yields, investment in the alternatives market offers asset diversification, income stability and capital growth potential – all critical components to successfully battling uncertainty.

Major European cities are forecasting lower levels of employment growth in 2019, which could impact the office segment. Due to this fact, we will potentially see slower rates of growth in leasing levels this year as there will be limited expansion within office-based employment. Tech-enabled, high-amenity ‘smart’ buildings are becoming highly sought after, however.

2018 was a tough year for retail with consumers firmly in the driving seat; businesses are continuously being forced to adjust to shifting consumer expectations and behaviour. Retail investment levels have not yet been curtailed by this, but investors will become far more selective in their choice of asset within this segment. Assets that offer experiential retail or convenient local amenities could perform well but there is a trend amongst retailers to opt for larger stores in fewer locations which may well hinder rental growth.

The conclusion

Despite the risks and uncertainties faced, the European property sector presents several exciting opportunities for investors. Whilst some sectors will see more tempered growth, the general picture is positive, but investors will have to be highly selective in their decision-making process if they’re to make a success of 2019. Global uncertainty will not bring the Real Estate market to a halt in 2019.

Helping you make 2019 a success

With 2019 being a year of highly selective decision making, Real Estate advisors are going to need to ensure that the transactions they are involved in are executed as efficiently and expediently as possible.

Imprima has a wealth of experience in assisting Real Estate advisors with their transactions. Our Virtual Data Room caters for the full spectrum of real estate activities; from raising capital and divesting assets to portfolio management.

Our virtual data room advisors are equipped to help you discuss your specific requirements based on any potential strategy in 2019 and to ensure that we add-value to the management of your transaction. Speak to us today to discuss your upcoming projects and we’ll demonstrate how we help bring Real Estate transactions to market effectively through our suite of Virtual Data Room services.

Speak to an advisor today.

 

 

External Sources:

https://www.economist.com/finance-and-economics/2018/12/13/the-ecb-halts-quantitative-easing

https://bmogamviewpoints.com/the-only-certainty-is-uncertainty-looking-for-answers-in-2019/

https://news.cbre.co.uk/cbre-2019-market-outlook-european-real-estate-markets-continue-to-build-momentum-despite-global-uncertainty/

https://www.theinvestor.jll/news/world/others/real-estate-allocations-concentrate-on-the-mega-funds/

https://www2.deloitte.com/uk/en/pages/consumer-business/articles/retail-trends.html