What are some key findings for investors in this report?

Our current research highlights two keys things. The first is how differently countries have acted in terms of their management of the COVID-19 pandemic, resulting in different response rates and thus the ability to form clear lockdown exit strategies.

The second is how the national exit strategies put in place will play out at a city level, given the variance in the underlying social, economic and physical infrastructure of each city.

When you consider the variety of factors involved, you start to appreciate the complexity of the challenge in getting people back into the centres of activity that make up our cities – for work and play. This means city economies will get back to speed at different rates, with longer-term implications as to how they, and the assets within them, will function in future.

Which EU markets appear compelling investment destinations as Europe begins to exit lockdown?

You’re always going to look at markets differently depending on your appetite for risk and return, and what is important to support and drive your style of investment. Core investors are going to look for the most secure economies backed by their government, and markets comprising assets with low risk / volatility in income, strong depth of capital and fair pricing.

On this basis, the DACHs markets have got to be at the top of the list. These countries have exited the pandemic first, with healthcare support structures that can help mitigate against a second wave. Their economies and households are supported by a combination of deep government pockets/guarantees and established systems to support businesses and salaries.

Germany was the biggest cross-border investor in Europe in 2019, highlighting the depth of capital. Some outward movement in yield pricing might be needed to support most core investors, but for Germany in particular, limited anticipated volatility in office market vacancy – and thus rents – creates an attractive proposition amid greater levels of uncertainty elsewhere.

The central location of the DACHS region from a European logistics perspective, and well established residential rental markets also puts this region in a strong position when it comes to the most defensive asset types being sought by investors at present.

DACHs is not the only region of course. London and Paris will always be on the core list, but with activity limited courtesy of being in lockdown and with capacity challenges to come in terms of getting employees back into central locations / offices, there are likely to be more core-plus and value-add opportunities. London has the advantage of going through a pre-Brexit repricing in terms of yield, adding to its attractiveness.

Data Centres are more of a niche play, but ‘occupier / operator’ and investor demand is clearly high and rising, reflected in share prices for some listed data centres now ahead of their 1 January 2020 position – this is in stark contrast to listed retail and hospitality focused REITs and PropCos.

For your Core-plus and Value-Add investors, the big European centres are always going to be a first port of call given the depth of product on offer, notably the Nordics, Benelux and core CEE markets of Poland and the Czech Republic alongside the UK, France and Germany. A lot of opportunistic investors are reviewing the hospitality and retail sectors of the Mediterranean markets in particular, with a close eye on how the summer season plays out.

It is also interesting to see how Turkey and Greece have already set out plans to open up their hospitality and hotel industry, with an initial focus on domestic tourism. As our research has pointed out, some locations are better positioned than others in terms of their ability to function on domestic, as opposed to international tourism. The Czech Republic is the only market to open its borders to date.

A final note relates to retail and logistics. While many markets present an opportunity to develop more modern logistics space to support growing levels of e-retail, pure play retail has never proven to be particularly profitable. People will always want to shop in-store, not just digitally.

Equally, retail parks and grocery are clearly proving to be resilient. So while retail will bear the brunt of the economic impact of this pandemic, this will simply accelerate the need to reduce the excessive physical footprint of retail across high streets and certain shopping centres. Community businesses and services should hopefully take their place, complementing the remaining retail on offer.

Does this research reveal any surprise findings?

Whenever I take on a new research project there are always deductive and inductive elements to it, which hopefully result in a few ‘a-ha moments’. Our current research campaign to understand the evolution of the COVID-19 pandemic has so many nuances to it, there have been several new learnings for me, and also clearly across our readership.

How countries function, their economic and social structures, differences in the day-to-day operations of cities, their residents and workforces has also come under scrutiny to develop a clearer understanding of how well countries and cities are likely to manage the pandemic, the economic and social impact and what this means for a return to the new normal. For instance, I only recently figured out that Malta is the global capital for e-gaming on a per capita basis.

I think the most pleasant surprise for me is just how quickly, and significantly, governments have reacted to manage the situation and support business and households to function – at least short-term. When you look back to the reaction of governments post-GFC, it took years before a considered, joined-up approach brought European economies back from the depths of 2009, which adds greater credence to a swift recovery this time around.

The other key surprises are around social infrastructure - notably healthcare capacity. The difference in the number of beds and staffing to support national health services across European countries is quite staggering. The DACHs markets of Germany, Switzerland and Austria benefit from double the staffing and triple the existing bed capacity of the UK, Spain, Italy, for example.

So it is clear how the DACHS countries have emerged from the pandemic first by managing down the number of cases and lowering infection rates. In this context, you can better understand why so many people in the UK voted for Brexit in order to improve the UK’s national healthcare capacity.

The final key learning is how quickly we forget what things were like only a few months ago. ESG was growing in significance across the investor universe, and the world needed to re-consider how we function for the health of the planet and future generations. One of the silver-linings of the extended lockdown is our habits and mind-sets have been forced to adopt to a new way to live, work and play.

There are many things we miss, and other things we do not. As we emerge from the pandemic, I hope cities and economies will change the way they function. Not just to mitigate against the risk of a second wave or future pandemic, but to create more sustainable, low-pollutant cities, reduce the strain on resources and mass transit commuting, increase social mobility and create much healthier and more productive places to work.

Using technology to enable and monitor change and corporate governance to make it happen should be one of the major upsides. Cities and companies that help employees achieve a better life-work balance will undoubtedly be rewarded, especially as more staff realise they can – and still want to – work from home (1 or 2 days a week). Driving higher levels of impact investment in healthcare and support services will also, hopefully, be another positive to come out of this.