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• All Property total return of -4.3% forecast for 2020
• Returns to bounce back to +7.6% next year
• Short but deep recession will see investment transactions pick up in H2
• Retail and leisure to drive negative return; offices and industrial remain positive

Download Investment Brief Spring 2020.

Returns from All Property will turn negative in 2020 as a result of the economic impact of coronavirus ‘social distancing’, dropping to -4.3% for the year, according to the latest Investment Brief research from property consultancy Gerald Eve.

Drawing on MSCI and proprietary data, the report predicts a resurgence in investment activity in the second half of the year, with total All Property return bouncing back in 2021 to 7.6%. The forecast is predicated on a short but deep recession with the main impacts felt in Q2 2020, and relatively few entrenched ‘second round’ negative impacts, such as widespread insolvencies.

Amid widespread retail and leisure closures, these sectors will drive the negative return, with both falling rents and negative yield impact generating a Retail annual total return of -17.7% in 2020. By comparison, returns for Offices and Industrial are forecast to remain positive for the year, albeit at only +3.5% and +1.3%, respectively.


Investment outlook

The coronavirus ‘lockdown’ has made inspections and surveys effectively impossible and there is increased scrutiny of the risk of tenant default and impact on cashflow. Occupiers linked to discretionary spending are viewed least favourably, with food and logistics likely to be the most resilient in the short term. Consequently, only deals that were relatively advanced in the process are likely to complete and we expect there to be very low investment volumes for Q2.

John Rodgers, partner at Gerald Eve, said: “Many planned sales have been postponed, reflecting the sheer logistical challenges involved in executing transactions at this time. The fate of sales that were already in process remains uncertain, with the majority put on hold or seeing extended timescales as sellers face technical and reporting difficulties. In general, cashflow uncertainty is driving a more cautious approach to underwriting and some investors are returning to investment committee to stress-test previous assumptions.

“The fundamentals underpinning the office and industrial sectors – limited current supply, and low levels of both development and leverage – mean there will be continued interest in such assets. This will be especially true once coronavirus restrictions are lifted and the true economic impact becomes clearer, but trophy assets will see interest throughout the crisis as investors seek to capitalise on lower values.

“Alternatives were the most-traded asset class in 2019, some 41% of the total, but with sectors such as leisure, student housing and hotels the most exposed in the current crisis, investments of this type will be much lower until restrictions are lifted. That said, the general under-supply seen in the hotel market will make them attractive assets again once the dust has settled and it is clearer which operators have successfully navigated these extraordinary times.

“We are all looking for an end-game to this crisis and, whilst we have seen restrictions largely lifted in China and many production facilities have started operating again, we are realistic that existing lockdown measures may have to last longer in Europe, probably through most of the second quarter.”

Key contacts

John Rodgers


Lloyd Davies


Callum Robertson


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