Look to data centres and warehouses for property growth

First Sentier has identified several ‘megatrends’ such as the growth in e-commerce which bode well for global listed real estate, particularly in assets such as data centres and warehouses.

These megatrends would benefit the sector in the medium to long term as well as a global economic recovery, although the pandemic would remain a risk.

Stephen Hayes, head of global property securities at First Sentier, said data centers, logistics warehouses, self-storage facilities and healthcare assets had done well while areas such as hotels, shopping malls and leisure assets had been disproportionately affected by the lockdown.

“We are looking at the implications of continued growth in e-commerce adoption, shifts towards more flexible working arrangements, the decentralisation of our cities, the fitness for purpose of healthcare systems, falling home ownership rates, ageing populations and rising data consumption,” Hayes said.

“Against this background, we see a number of opportunities across our investment universe and have conviction in a range of real estate sectors that are underpinned by solid tenant demand and structural growth tailwinds.”

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The residential-for-rent sector was also positively positioned for 2021 and had been less affected by the pandemic. As people looked to move away from large urban centres, this would support residential housing in suburbs and city fringes while those inner-city apartments would see deteriorating fundamentals.

“These assets have been largely insulated from the effects of the pandemic, as tenants have demonstrated a continued ability to meet their rental obligations with the support of government assistance,” Hayes said.

“As housing is a basic social need, residential assets are inherently defensive and tend to deliver stable cash flows during economic downturns like the current recession. We believe the risk-adjusted returns currently offered by the sector are very compelling.”