Global real estate investments will hold up and increase or stay the same over the next 12 months, with strong opportunities in logistics, multifamily and CBD offices across the Asia-Pacific region, according to global survey conducted by Savills Investment Management.
Although Savills IM’s outlook global report “Building resilience in global real estate portfolios” forecast no major demise across the office sector despite the increase in agile working driven by the pandemic, in Australia more flexible working arrangements and a preference towards working away from CBD offices may mean higher vacancies in the near term and many occupiers would likely introduce changes in the way they occupy office space given that working patterns would normalise in 2021 and beyond.
This would compel higher rental incentives to maintain tenancy will to be a likely feature amid elevated vacancies in 2021.
Australia was going through the sharpest recession on record, according to the report, saw its both domestic and external demand battered by the pandemic and associated restrictions. However, both business and consumer sentiment improved considerably in Q3 2020, reinforcing tentative green shoots of economic recovery.
“It is a sign of confidence in the country’s fiscal and monetary authorities for their handling of the coronavirus pandemic which bodes well for both business and domestic consumption,” the report said.
As everywhere else, the pandemic accelerated e-commerce trends in Australia, which helped fuel robust logistics demand from supermarkets and third-party logistics firms upgrading to meet the short-term surge and long-term expansion of online demand.
Following this, the anticipated economic recovery in 2021 and sustained growth thereafter should support rental growth and further yield compression in Sydney and Melbourne while consumer demand for fast delivery would be expected to increase the desirability of centrally located sites with good transport links.
However, an accelerating shift towards online retailing, social distancing measures and international border closures would make for a challenging retail operating environment ahead, particularly for prime retail formats in the CBD areas.
According to Savills, yields would be expected to surge 40–50 basis points, especially in Melbourne, by the end of 2020 due to the lockdown, while the lack of tourists would also see a continued yield expansion in Sydney into 2021.
At the same time, the report also found that prime retail formats were anchored by non-discretionary tenants, such as food retail, will remain resilient.
Australia was named 8th most attractive geography for real estate investments in 2021.
According to FE Analytics, the top-performing funds over the year were: Freehold – Australian Property (0.49%), Crescent – Wealth Property (-0.77), the AMP Capital Listed Property Trusts (-1.52%) , CF Property Capital – Chiodo Diversified Property Development (-1.57%) and AMP Capital Property Securities (-1.67%).
