With recent political uncertainty and the prolonged unwind of the GFC, focus remains on downside risks.
Our outlook shows robust economic fundamentals are driving occupier and investment markets in a positive direction over the next 2-5 years, with little risk on new supply, rising interest rates and leverage.
Occupier markets are showing better market rental growth as new supply remains modest and net absorption steps up with improving consumer spending and employment growth. E-commerce is a key driver for both the bifurcation in the retail markets and the new record take-up across logistics.
With the recovery in capital values and tightening of yields across the most liquid core investment markets, investors should consider adjusting their focus for the medium term to:
- Consider a broader range of European markets, as implied by our market scoring;
- Focus on income returns, as marginal yield widening and limited upside in capital value is projected;
- Given the low systematic market risks at the moment, expand into value creation assets.
Source : AEW Europe