Invisible to the naked eye, the COVID-19 virus has nevertheless left traces of its passage everywhere: more than 2 million casualties worldwide, closed borders and restricted civil liberties. 2020, «The Worst Year Ever1», was marked by a pandemic crisis that caused a violent and unexpected recession in global economic activity (-3.9%).
2021 is already shaping up to be a pivotal year during which we expect to gain the upper hand over the pandemic and achieve the hoped-for breakthrough (+5.2% for world GDP). However, there are still many uncertainties we will need to deal with along the way out of the tunnel. A major challenge is emerging for all countries throughout the world: the success of vaccine campaigns, despite the multiplication of variants and the implementation of new lockdowns at the beginning of the year, in order to ensure a revival of confidence and activity from mid-2021.
With the acquisition of a large portfolio of vaccines (2.3 billion doses), based on various technologies already developed or under development, the European Union is aware of the risks of downgrading that could result from failure or too long a delay. After a historic decline of -6.8% in the eurozone in 2020, there is some hope for a resumption of economic growth in the eurozone in 2021 (+4.1%). However, the strength of the recovery will not be uniform across European countries. In Germany, GDP is expected to rise in 2021 (+3.6%) after a contraction in 2020 (-5.3%), a dynamic quite similar to that of the Netherlands (+2.6% in 2021, -3.9% in 2020). In France and Belgium, activity is expected to rebound even more strongly in 2021 (+5.0% and +4.0% respectively) because the decline was stronger in 2020 (-8.3% and -6.2%) compared to the economies of the North. In Italy and Spain, the economic rebound is expected to be 4.5% and 5.8% respectively in 2021 after a decline of 8.8% and 10.9% in 2020.
At its last meeting in January 2021, the ECB reconfirmed the very accommodative stance of its monetary policy to support the eurozone economies. Accordingly, key ECB interest rates will remain at low levels until the inflation outlook of close to 2% is sustainable. In addition, the ECB will continue its work on the Pandemic Emergency Procurement Programme (PEPP), which now totals €1,850bn. One of the effects of this policy has been to enable a reduction in yield spreads between the long-term German interest rate for the largest economy in the eurozone and the other countries.
With €240bn invested in 2020 (-25% year-on-year), including €150bn for the eurozone (-30%), the European commercial real estate market2 is declining due to the caution of investors who have largely opted for well-located assets leased to resilient tenants. Investment volumes for Germany (€60bn, -23% year-on-year), France (€30bn, -36%), the Netherlands and Belgium (€16bn, -23%) and Italy €8bn, -34%) remained well above their ten-year average, with the exception of Spain (€9bn, -54%). Overall, prime yields for the best located office, residential and healthcare sectors remained stable or experienced slight year-over-year reductions. On the other hand, the current crisis has had a strong impact on shops and hotels, which saw their yields climb between the end of 2019 and the end of 2020.
1 Time Magazine cover title for December 2020
2 Commercial real estate refers to office, retail, logistics, service and residential real estate for institutional investors.
Sources for figures: BNP PRE, CBRE, RCA, Oxford Economics.
The team
With a university education in local economic development, Daniel While began his career as business establishment consultant to local authorities. In 2006, he joined the Institut de l’Epargne immobilière et Foncière as analyst, and specialised in the world of unlisted real estate funds (SCPIs and OPCIs for France).
He is co-author of the book Les OPCI published by Delmas (September 2008). He joined Primonial REIM in 2017, where he held the position of Development Director, then Research & Strategy Director from 2019.
Henry-Aurélien Natter joined Primonial REIM as Research Manager in January 2018. He has the mission of developing the analyses of the Research & Strategy Department on the real estate markets, the economy and capital in France and in Europe.
Henry-Aurélien Natter began his career at Les Echos Etudes (formerly Eurostaf), then at C&W (formerly DTZ), and lastly at BNP PRE, where he acquired solid and varied experience in real estate research, strategy and finance. He is qualified with an AES degree in Business Management, a Masters Decree in management and SME management, and an International Master in commerce and marketing.
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