CONV IMMO EUROPE Avril 2020 - header

Real Estate Convictions Europe

End of 2019 and 1st quarter 2020

CONV IMMO EUROPE Avril 2020 - pétale

While trade tensions seemed to ease between the United States and China, it is a virus, COVID-19, that has destabilised the entire global economy for 2020.

With the number of infected people steadily rising and quarantine measures for 3.9 billion people, this foreshadows the scale of the crisis that many countries will have to face. For Thierry Breton, European Commissioner for the Internal Market, «this crisis is accelerating changes in the world, in our way of living and producing, in the age of the digitisation of society». While this crisis does not prefigure the end of globalisation, according to the Commissioner, it will force us to rethink global value chains and the relocation of certain critical industries, particularly in the field of healthcare.

The coronavirus pandemic comes at a time when signs of a slowdown in economic growth had been appearing since the end of 2019. The health crisis will therefore inflict a deep recession on the global economy in the first half of 2020. According to the forecasting institute Oxford Economics, this situation is expected to result in a 0% GDP growth for the year as a whole at a global level. As for the eurozone, it is heading for a sharp recession, pushing GDP growth forecasts for 2020 to -2.2% (compared with +1.0% at the end of 2019), before a strong rebound to 3.9% in 2021. This «V» scenario assumes that most of the impact will be concentrated in the first half of the year, before a gradual resumption of expansion, the lifting of lockdown measures and the implementation of monetary and fiscal stimulus tools. How the epidemic plays out will be decisive in determining the ultimate economic damage, and post-crisis management will be decisive in ensuring a proper recovery. In 2020, all the main eurozone countries will be heavily impacted: the Netherlands -1.1%, Spain -1.9%, Germany -2.1%, France -3.1% and Italy -3.5%.

As anxiety and uncertainty gripped the stock markets, the G20 governments committed to a «common front» against the coronavirus pandemic. They are reportedly ready to inject $5 trillion into the global economy. On the other hand, the US and European central banks announced that they were ready to intervene «without limit» to ensure the proper functioning of capital markets and the banking sector. Accordingly, governments should be able to continue to borrow at an interest rate close to zero or at a negative interest rate in 2020, i.e. a level similar to 2019. This policy of low borrowing rates will support the real estate risk premium.

With nearly €300 billion of investment in 2019 (+4% year-on-year), including €197 billion for the eurozone alone (+7%), the European commercial real estate market* once again attracted capital in 2019. Germany (€69.4 billion in 2019, stable year-on-year) and France (€41.6 billion in 2019, +9%) were able to attract capital, while the United Kingdom crystallised a certain amount of caution among investors due to Brexit (€54.6 billion in 2019, -16%). In the first quarter of 2020, the first figures for the European commercial real estate market show a volume of around €46 billion in Europe, down 15% year-on-year, but in line with the average over the last 10 years. Overall, prime office yields continued to experience compression for the most core assets and remained stable for core retail premises at street level. However, with a decrease in investment volumes in 2020 and the return of «risk aversion» strategies, a new hierarchy of yields is to be expected.

Sources for figures: CBRE, RCA, Oxford Economics
* Commercial real estate refers to office, retail, logistics, service and residential real estate for institutional investors.

Read the note

Couverture Note Marché immobilier europe bureaux commerce résidentiel santé hôtel

ETUDE - Equipe

The team

Daniel While Research & Strategy Director

Henry-Aurélien Natter Research Manager

ETUDE - Titre nos publications

You may also like

Asset Publisher

Fall 2020 : Real estate keeps on track
  • Overview

Fall 2020 : Real estate keeps on track

17/09/2020 By Daniel While

How can savings be redeployed and what role can real estate play if crisis constraints need to be maintained for an extended period, even if less severe? On this new note, Daniel While, Head of Research & Strategy, explain the different prospects.

Read the note
Les fonds immobiliers non-cotés face au deuxième tour de la crise : la résistance des valeurs
  • Overview

Les fonds immobiliers non-cotés face au deuxième tour de la crise : la résistance des valeurs

30/06/2020 By Daniel While

La question des valorisations immobilières se pose, au regard du nouvel environnement économique. C’est la situation des fonds immobiliers non cotés (SCPI, SCI, OPCI) que nous examinerons plus particulièrement, en positionnant les stratégies de Primonial REIM dans cette analyse.

Read the note
Marchés locatifs de bureaux en Europe et crises économiques : quelle sensibilité ?
  • Overview

Marchés locatifs de bureaux en Europe et crises économiques : quelle sensibilité ?

15/05/2020 By L'équipe Recherche

Il nous a paru intéressant, alors qu’une crise économique s’ajoute à la crise sanitaire mondiale, de revenir sur le lien entre croissance et loyer de bureau, dans les principaux marchés locatifs européens, au cours des 20 dernières années.

Lire la note