2021 House View: European Property Market Outlook


Will McIntosh, Ph.D
Global Head of Research

Karen Martinus
Senior Associate, Research

Justin Hildebrandt
Managing Director, Development

Max von Below
Managing Director, Global Investors Group

December 2020

Executive Summary

We are pleased to present our 2021 House View for Europe. This publication is typically produced annually and serves two essential purposes. First, it highlights our outlook for the economy, the capital markets, and the commercial real estate (CRE) sector. Secondly, it provides a forward-looking framework regarding our investment themes and strategies. This year we deferred our mid-year House View, given the status of the pandemic at that time, and elected to produce this document at year-end 2020. The following includes several highlights from the report:

  1. The COVID-19 pandemic has taken a significant toll on the economy and will continue to shape the pace of recovery in 2021. A high degree of uncertainty surrounds the outlook, and we are continuing to monitor the potential for downside risks and upside surprises.
  2. Early indications suggest the recovery will be uneven across Europe, with imbalances in the fiscal response exacerbating differences in the structure of individual economies.
  3. The full extent of any value adjustments for real estate are still emerging, but distress will be unevenly distributed, with some property types, for instance logistics, enjoying enhanced performance while others, such as retail, experiencing more stress.
  4. The pandemic has fueled certain themes that demonstrate the opportunity between the intersection of technology and real estate. In the context of logistics real estate, the increase in online shopping suggests demand for much greater warehousing stock going forward.
  5. The combination of record stimulus and continuation of very low interest rates has pushed bond yields to their lower bounds and set the stage for continuing increased allocations to real estate.