Managers add to real estate in expectation of return to normality
While real estate companies have been forced to bear the brunt of the restrictions caused by the pandemic, this has meant it will be one of the major beneficiaries of a COVID-19 vaccine success, according to Quay Global Investors.
Real estate companies had been hurt this year as restrictions and lockdowns meant people were working from home rather than in offices, while online shopping reduced traffic in shopping malls and city centres. Finally, high unemployment meant landlords were forced to offer rent freezes or cuts for tenants.
However, this meant they were among the best-performing stocks following the success of three COVID-19 vaccine trials as people were expectant of a return to normality. Beneficiaries included firms such as Unibail-Rodamco, which had risen more than 70%, Vicinity and Scentre Group.
According to FE Analytics, the Australian listed property sector had lost 6.5% over one year to 25 November, 2020, but had seen a turnaround to report gains of 11.9% during November.
Chris Bedingfield, principal of Quay Global Investors, said: “A successful vaccine should help to reverse some of the headwinds and we are already starting to see this priced into some sectors.
“Our view is that the real estate sector is under-priced and that there will be good opportunities in 2021.”
Indraneel Karlekar, global head of research and strategy at Principal Real Estate Investors, said: “Investors who believe that life is likely to return to the ‘old normal’ will have a very different view of the value of CDB office investments, and in the immediate term, different types of real estate are experiencing an uptick in demand, like warehouses needed to accommodate the surge in online grocery shopping.
“Whether demand will continue depends on your view of how soon, if ever, we return to life as it was.”
The low valuations of real estate had also encouraged fund managers to pick up the stocks at reduced levels.
Adrian Warner, chief investment officer at Avenir, said his Avenir Global fund had added a position in CBRE as a recovery stock for the portfolio. Shares in CBRE were flat since the start of the year but had risen 35% over the past month.
“We hold CBRE which is the largest commercial real estate company in the world but in the pandemic valuations were down as people are working from home so its valuations are back at an attractive level.”
AUTHOR
Laura Dew
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