Revisiting 2021


In my eight years as the IFN Real Estate Correspondent, I have never felt the need to revisit my IFN Annual Guide — Real Estate chapter so early in the new year to confirm whether my predictions were still on track. But with January having passed by in a flash and with COVID-19 on the ascendancy again, I dug out what I had penned back in November to check.

In summary, I foresaw yields most likely remaining low with investors needing to adjust their return requirements down, and that the increased demand for secure investments will remain but with buyers recognizing that this can be achieved in a wider range of property sectors. So far so good, as there is evidence to support both forecasts.

Only a month in, the darling of the defensive strategies, logistics, is in even greater demand.

Gathering market intelligence from developers and agents alike, there has been another material drop in yields. The only question now is how low can they go?

Elsewhere, the office sector is better balanced with the “Will employees return to the office once the pandemic is over?” debate dampening investor demand a little.

What we have seen in the last month is tenants committing to new buildings on long leases across the US, the UK and Europe, arguably finding it a good opportunity to secure an attractive deal.

Meanwhile, investor appetite, particularly from the Middle East, remains.

I had mentioned residential in my yearend forecast for 2021 as being a sector of continued focus for many, and so great to see Investcorp starting the year with a bang, adding, in a US$330 million acquisition, more than 1,800 units across Atlanta, Baltimore and Jacksonville to reach an impressive total in excess of 14,000 units across the US.

But what of the alternatives to mainstream property sectors? Hospitals make a lot of sense at the moment, and we have certainly been active in that sector. And while it is still too early for many to revisit care homes and student accommodation, supported by strong demographics their time will come again.

However, what of retail? Surely it is all dead, confined to the history books by a plethora of delivery vans? Beyond the negative headlines, evidence would strongly suggest otherwise.

Our own 90 North has secured new or extended retail leases worth GBP1 million (US$1.37 million) a year in rent during the last three months alone, and almost all on 10-year terms.

No doubt it is tough out there for many retailers, but others have been embracing the internet revolution and providing the destination and convenience that consumers demand.

So, we push on, and if you are looking for a bit of yield, this is the year to widen your search.

This article was first published in Islamic Finance news dated 3rd February 2021 (Volume 18, Issue 05)