Long-term sector structural trends in demographics, technological change and ESG are key to long-term income growth—and therefore capital flows and pricing. The Barings Real Estate team weighs in.
- The recovery in GDP is underpinned by running down lockdown savings, public sector investment and an improved export outlook.
- Surging inflation is temporary—reflecting a reawakened, rather than an overheating, economy.
- Greater economic/labor market slack remains in Europe, relative to the U.S.
- Commercial property investment is down by a third in Q1 2021 versus a year ago, while preliminary data indicates a Q2 revival is underway.
- Retail investment continues to decline and office capital flows are weak, with investors continuing to pivot toward apartments and logistics.
- Europe was the top destination for real estate capital raised last year.
- Office occupiers are currently more optimistic about the sector than investors are—we continue to envisage that occupiers will demand less space, but of a much higher quality.
- Long-term sector structural trends in demographics, technological change and ESG are key to long-term income growth and therefore capital flows and pricing.
- Investors seeking long-term insulation from inflation should tilt their portfolios in line with wider societal changes.