A new dawn for European real estate
Standing on the edge of a new decade, it’s important to reflect. This year proved to be a tumultuous year – marked with Brexit woes, trade wars and political uncertainty triggering decline in business confidence – which inevitably dominated investment decision making. However, despite all this, the real estate market has marched on and we expect to see strong returns from real estate.
But looking ahead, where are investors likely to reap the rewards of the European real estate market? As a boutique European real estate investor, we always keep an ear to the ground for emerging trends that will move the market in the long-term. Here are the top five trends we are following for 2020:
Hot hotels: The hotel sector remains an attractive alternative investment, driven by broad improvements to infrastructure making travel easier, increasing wealth in global populations – with both increasingly mobile younger and older populations keen to spend money on experiences and travel.
Real estate goes green: The real estate market is an important battle front in the fight against climate change. From an ethical standpoint, buildings should simply be cleaner and more environmentally sound, but investors also increasingly need to demonstrate their environmental credentials within the wider ESG label. We and others in the space are investing in technology that manages the energy use of our buildings and allows investors to understand, with clarity, how green their investment really is.
The new space race: Buildings no longer function as single spaces. Developers and investors today need to consider the influence of space and plan for the long-term and give tenants what they want – more dynamic and creative spaces. Offices are no longer a space to work in, but also a powerful recruitment tool for attaining and retaining top talent. Buildings must deliver the “wow-factor” to attract and keep tenants – whether by offering gyms, bars, break-out spaces or a tech-driven environment. We’re having to think about spaces more carefully than ever before and 2020 will see this trend accelerate.
City Centric: We’re seeing more and more people moving to larger cities in Europe, where demand is high and vacancy low. It’s not just the Tier 1 cities but the Tier 2 cities that are looking attractive too and set for growth.
We see Amsterdam and Berlin looking particularly attractive and in tier 2, Rotterdam – all with dynamic young populations working, playing and staying in their cities, requiring exciting spaces to match. Risk shouldn’t be taken on location – select cities that are benefiting from urbanisation and changing demographics, that are set for growth supported by tourism and business.
Brexit: The UK should not be ignored and remains attractive and will continue to remain attractive in the immediate picture, with the impact of Brexit on the UK market largely overstated. Ultimately, the occupational market remains stable and there is opportunity if investors are able to source assets at the right price, with uncertainty broadly priced in at this point. Clarity will be critical as the new UK government takes its place.
While it’s always hard to know for certain what’s coming around the corner, we think these trends will be key themes for investors wanting to realise a solid investment strategy. And with real estate yields still at a premium compared to bonds, European real estate remains an attractive investment strategy.
Importantly, a lot of this will become more possible as we start to see a stabilising macro environment across Europe, which will only benefit investors in the long-term. So, if we could have one wish for the New Year (and the next decade), it would be that this stabilising trend continues.