EDITOR'S LETTER: Record yields amid the flux

In the near future, we expect to report on record yields, especially for logistics and offices, but also for other asset classes, writes PropertyEU editor-in-chief Robin Marriott.

These past few weeks, our time has mainly been spent hosting events and producing hot-off-the-press articles about who said what.

It felt great to finally be able to gather people together at our HQ in the Netherlands to discuss Dutch real estate, for example. Our experts really enjoyed getting back to face-to-face discussion and stayed on afterwards for some socialising over drinks where relationships were further forged, and business ideas mooted.

That’s how the real estate business works best and why the relaxation of lockdown rules across Europe has been a positive for the industry. However, it must be said it feels like ‘one step forward and two steps back’ as individual nations tighten up once more in the face of rising Covid cases. The UK, France, Spain and indeed the Netherlands are examples. Just before press time, the Dutch prime minister announced new measures advising people to work from home wherever possible.

The experiences of real estate professionals therefore vary from country to country. In Germany, where the government is widely regarded as having managed the crisis better than most, there is a degree of normality with face-to-face meetings. In the UK where I am based, it feels like we are behind mainland Europe and it is more frustrating.

Meanwhile, the investment market is displaying two-tier characteristics. Demand for super-core assets is so strong. In the near future, we expect to report on record yields, especially for logistics and offices. We have already started doing this, for example writing about the sale of an office in Munich and Oslo. We also expect to report on hot yields for alternatives such as data centres and also residential in its many forms.

For assets where there is a degree of greater risk, however, people need more time and, crucially, price discovery. That has not come through yet so the demand in these areas of real estate is thinner.

Strong demand for core product is coming from the usual suspects – all of which are listed in our latest Top100 Investors ranking published this month. We expect the vast majority of large deals to be done by this cross-border group of companies which typically have local teams or partners on the ground.

For property agents, the game has changed somewhat. They are introducing potential deals to a smaller group of buyers. There is no need to go high and wide. Testing demand by keeping things tight with just a handful of trusted groups means deals can be discussed without them necessarily being blazed all over the property press, which can cause some embarrassment if it turns out demand for a certain deal is not that hot.

Amid these new dynamics, we are tracking the market hard. We report on new deals every day on our website, and analysis of the most interesting ones will resume in the next issue.



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