While the pandemic has killed more than 3 million people worldwide, India has become the new epicentre of the epidemic where the situation is particularly worrying. The world’s largest economy, the United States, is outlining what the rebound of developed economies will look like in a vaccinated world that is being fuelled by a massive stimulus package to ensure recovery.
Although the horizon is brightening for those economies that have the capacity to achieve herd immunity quickly and are able to implement major recovery plans, the ground that still needs to be covered before the «light at the end of the tunnel» is seen, differs greatly from one country to another. The rebound in activity (+6.1% in 2021) will be guaranteed provided that vaccination campaigns are successful and the health risks that variants could cause are eliminated.
After a period of further travel restrictions during Q1 2021, the Old Continent is looking to lift lockdown measures while vaccination campaigns are seen as too slow to control the circulation of the virus and ensure an immediate recovery. The European Union is aware of the risks that failure or too great a delay could have and is therefore looking for various solutions to speed up its campaign. After a historic fall in GDP of -6.8% in the eurozone in 2020, and although 2021 is looking brighter (forecast of +4.1%), there are still a number of uncertainties that need to be dealt with in order to the stop and go strategy of economies and ensure a real recovery. In Germany, GDP is expected to rise in 2021 (+3.8%) after a contraction in 2020 (-5.3%), a dynamic quite similar to that of the Netherlands (+2.9% in 2021, -3.8% in 2020). In France and Belgium, activity is expected to rebound even more strongly in 2021 (+4.9% and +4.1% respectively) as the economic downturn was sharper in 2020 (-8.2% and -6.3%) compared to the economies of the North. In Italy and Spain, the economic rebound is expected to be 4.5% and 5.5% respectively in 2021 after a decline of 8.9% and 10.8% in 2020.
At the beginning of the year, the ECB confirmed the very accommodating stance of its monetary policy to support the eurozone economies. Although they may rise, key ECB interest rates will remain at low levels until the inflation outlook of close to 2% is sustainable or if the economy overheats. One of the effects of this policy has been to enable a reduction in yield spreads between sovereign rates and the other eurozone countries. The indirect consequence of this situation is that the risk/return profile for real estate is even more favourable.
With €50bn invested in Q1 2021 (-31% year-on-year), of which €29bn for the eurozone (-38%), the European commercial property market1 is declining due to the caution of investors who have once again opted for flight to quality by focusing on the location of assets and the resilience of tenants. Investment volumes for Germany (€12bn, -33% year-on-year), France (€7.6bn, -27%), the Netherlands and Belgium (€2.2bn, -66%) and Spain €1.7bn, -43%) remained well above their ten-year average, with the exception of Italy (€1.1bn, -27%). These investment declines should be put into perspective as they compare to a historically high first quarter of 2020. With the exception of residential, which saw a further compression of its prime yield, offices, healthcare, retail and hotels were mostly stable in Q1 2021 compared to the end of 2020.
1 Commercial real estate refers to office, retail, logistics, service and residential real estate for institutional investors
Sources for figures: CBRE, FMI, 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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