M&G Real Estate’s in-house research team produces regular updates on our key markets, alongside more in-depth pieces on major trends affecting global property today.
In this paper, we discuss the structural changes that are presenting challenges and opportunities for real estate globally, where adopting technological and innovation strategies can overcome such challenges.
- Successful strategy implementation should unlock new sources of customer demand, increase space productivity, and improve asset quality
- Real estate investors could thereby benefit from extended investment longevity, added value to their portfolio and more defensive income stream
This paper assesses the potential impact of rising rates on the UK property market. It shows that:
- Gradual transition towards a comparatively lower “new normal” for interest rates
- Relationship between property yields, interest rates and bond yields is nuanced and complex
- Capital values supported by market-specific factors during periods of rising bond yields
- Stock selection and effective asset management to drive rental growth and healthy returns
This report highlights a growing trend among European lenders taking an active interest in sustainability through green lending initiatives.
- The continued shift towards certification
- Margin discounts offered for energy efficient real estate
- Green buildings tend to exhibit lower systematic risk
This report is a deep dive into APAC retail and the macro fundamentals specific to the region driving the sector.
- Key trends influencing change in the retail sector and how e-commerce is set to slow in APAC from its double digit growth trajectory
- Physical retail is underpinned by consumers' social, experiential, convenience and dining out needs
- Active asset management to boost value of assets is crucial in the new retail age
A closer look at the drivers of change in UK retail and how the sector is adapting to evolving consumer needs.
- The proliferation of e-commerce, shifting consumer preferences and retailer cost pressures are drivers of change in retail
- Retailers are innovating to compete, complement and/or diversify from online retail by offering experience or convenience to consumers
- A proactive investment and asset management strategy is required to remain resilient to the rapidly changing sector
This deep dive into European retail explores the structural and macro factors influencing change and how retailers and landlords are maintaining competitiveness.
- Eurozone growth supportive of consumer sentiment pick-up and sustainable household spend
- Europe now the second most popular destination for outbound Chinese tourists
- Retail schemes anchored by luxury, food and big-ticket items best placed to resist e-commerce competition
- Landlords can drive footfall with experience-led retailing
By 2030, the €26 billion Grand Paris project is expected to generate $29 billion of net new money and add 200km to the transport network.
- Paris office submarkets stand to benefit more from the structural changes compared to the CBD
- Saint Denis and Saint Ouen to offer superior returns for a modest risk premium relative to the CBD
Read the Magnify: Grand Paris Project
Latest real estate market outlooks
Despite ongoing Brexit uncertainty, healthy economic activity in the UK is underpinned by consumer sector and continuing labour market strength. This UK real estate market outlook looks at the key trends driving the property market, including:
- Structural change continues to boost industrials
- Flexible office space providers advancing regional take-up
- ‘Destination’ retail expected to be well-place to weather turbulence
- Alternatives continue to attract investor demand
Economic growth in the Eurozone softened in 2018, but macro tailwinds remain strong, such as Japan and the European Union agreeing to remove tariffs on goods and services. This European real estate market outlook looks at the opportunities emerging across the continent and what we believe will be important to drive returns going forward.
- Emerging submarkets driven by new infrastructure offer bottom-up opportunities
- Defensive qualities of the residential sector creates attractive long-term potential
- Innovative and tourist-driven retail set to remain resilient to online competition
- Transport corridors between Europe and China to open up new investment
Despite external headwinds to developed economies, we believe domestic drivers should sustain the Asia Pacific region’s economic growth in 2019. This real estate market outlook explains our expectations for the property sectors:
- Residential is expected to deliver the highest total returns in 2019, given yield compression potential
- Office demand should remain healthy, supported by a growing services sector and stable supply/demand dynamics
- Positive structural drivers are underpinning attractive logistics return prospects
Finding the value in European real estate
The accelerating economic recovery in Europe continues and has attracted investment in the region. So, where is the value?
- Broadening economic strength supporting liquidity in real estate markets and rental growth
- Select value opportunities in markets undergoing major structural changes, such as the Grand Paris Project
- Rental growth to be primary driver of returns
Nordic, CEE and Southern European logistics markets offer better potential for attractive returns, according to M&G Real Estate research.
Here at M&G Real Estate, we forecast rental growth for logistics markets across Europe using our analysis of the physical and digital drivers increasing demand for logistics space. This includes infrastructure development across Europe and we reweight the European Commission’s Digital Economy and Society Index (DESI) to just those factors most relevant to logistics. We analyse the most attractive markets in terms of value and long term rental growth prospects.
Looking further afield for opportunities reveals edge of Central Business Districts as offering attractive fundamentals and value.
The recovery in Europe continues to boost employment and the office market. Tight supply has driven rental growth, supporting capital values. Attractive pricing for investors can be found at edge of Central Business District markets, whilst offering affordability for occupiers.