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Savills IM Identifies Opportunities From The Secular Shift in Capital Markets

Central business district (CBD) offices, supermarkets and food-anchored retail parks, as well as logistics assets in key locations across Europe, will present attractive investment opportunities in 2021 as investors regain confidence following the COVID-19 crisis, according to Savills Investment Management (Savills IM), the international real estate investment manager.

While containing the spread of the pandemic will remain the focal point, other challenges also lie ahead in 2021. The impact of the UK leaving the EU will come into full effect. Climate-related risks, rising inequalities and continuous geopolitical tensions likewise remain, all of which could threaten global stability. Embracing disruption to protect existing portfolios and identifying new investment opportunities is, therefore, ever more important. Part of this involves capitalising on structural trends that have accelerated as a result of COVID-19.

Savills IM’s 2021 Outlook report, titled “Building resilience in global real estate portfolios”, envisages no major demise of the office sector despite the increase in flexible working driven by the pandemic. The report stated: “Offices in CBD locations with good transport links are here to stay while the resilient income streams of food retail assets represent a strong buy for core/core-plus investors. Logistics, which has been a clear winner throughout the pandemic because of the increase in online shopping, will continue to be backed by solid fundamentals and structural tailwinds.”

But with low returns on traditional property assets – office, industrial and retail – investors are also looking to alternative sectors such as student housing, build-to-rent accommodation and senior living.

New research included in the report shows that 59% of real estate investors globally expect property markets in Europe to recover in 2021, with just over half (52%) expecting the recovery to begin between Q2 and Q4 next year. Some 45% of investors expect that real estate investment will increase over the next 12 months, and 25% expect investment levels to stay the same.

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