Research from Savills World Research team suggests that, following a relatively resilient 12 month period, logistics and operational residential assets will continue to come top of investors’ wish lists throughout 2021.

In an update to its global research programme, Impacts, in the 12 months to November 2020, the international real estate advisor says that although global investment volumes into real estate were down by 28% compared to the same period in 2019, not all sectors felt this equally. The industrial and residential sectors saw more modest falls in volumes, gaining market share to capture 21% and 28% of total investment, respectively.

EUROPEAN HOTSPOT
Savills predicts that core and core+ real estate investors will continue to be attracted by high specification office buildings in key European CBD locations with low vacancy rates such as Berlin, Munich, Paris, Milan and London this year.

The international real estate advisor also anticipates that convenience retail and last mile logistics assets in densely populated areas, and high specification logistics warehouses in markets with high or rising e-commerce penetration will continue to attract this group of investors. Multifamily assets in cities and regions with supply shortages will also remain key for investors.

Savills top picks for value-add investors this year are logistics developments in undersupplied markets such as the Nordics and Spain, short-term income sectors such as flexible offices and student housing, which are likely to recover in the second half of this year, and multifamily developments in markets with rising demand for rental such as Southern and Eastern Europe. Overall, with a number of European countries having introduced stricter environmental building standards in recent years, another investment opportunity is the renovation of buildings to meet higher green standards.

Risk taker investors may be able to repurpose secondary offices into residential assets, and purchase repriced hospitality assets in tourist destinations this year, according to the international real estate advisor. Top picks for alternatives in 2021 will include healthcare, senior housing and care home, data centres and infrastructures.

Marco Montosi, Head of Investment Italy, says: “In Italy, in 2021 we expect investment strategies to continue to focus on low risk and income stability. Sectors that have defensive characteristics and benefit from structural changes will capture most of investor focus. Availability of prime stock will determine sector allocation and competition for the best assets should keep prime yields low. We expect demand for Milan office properties and logistics assets to remain strong albeit shortage of stock could frustrate buyers. The share of investment in the residential sectors will depend as well from product availability and we expect more interest for alternatives including healthcare and data centres. Although total transaction activity will rise, it is likely to remain below 2019 levels.”

Eri Mitsostergiou, Director European Research at Savills, adds: “Investors who are ready to take on some risk may choose to commit to new developments, aiming to catch the cycle at its recovery phase. Developers are already seeking alternative funding as financing conditions remain tight.