M&G Real Estate’s in-house research team produces regular updates on our key markets, alongside more in-depth pieces on major trends affecting global property today.
At M&G Real Estate, we believe that well-serviced connectivity infrastructures provide strong support for a city’s property fundamentals too. A better understanding of connectivity can help investors to identify relative value opportunities in real estate and future-proof their investments for the long-term, as high density cities are more likely to efficiently service densification.
That’s why we developed the M&G Real Estate European Urban Connectivity Ranking to grade 64 European cities based on their capacity to improve physical and digital urban connectivity in the face of the growing density pressures that face Europe’s cities today. Find out how connected the city you invest in is by downloading our report and watching our video.
Latest real estate market outlooks
Backed by synchronised global growth prospects, continued improvements to business and consumer sentiment are expected in Asia Pacific.
- Singapore office rental growth is likely to be strongest growth over the next 3 years
- Recovery in consumer sentiment and continued growth in regional tourism should lift rents, particularly for Hong Kong
- Preference for logistics and South Korean logistics may see relatively higher total returns
- Cap rate compression is expected to make up less of the total return regionally and globally
Underpinned by improving demand fundamentals, we expect the European property market to continue delivering strong investment returns going forward.
Eurozone growth continues to gather momentum as political risks have receded. Loose monetary policy and reduced debt costs has encouraged investors to take on more risk and the share of foreign capital targeting Europe has increased.
The office sector saw the strongest rental growth in the year to Q2. Fewer retail markets are recording increased rental growth compared to the start of the European property cycle, while healthy demand continues to drive industrials.
UK economic growth has moderated, but performance potential is supported by long term fundamentals.
Real estate investors are offered a significant risk premium, the yield spread over government bonds. This spread offers a ‘cushion’ against upwards yield pressure should bond yields start rising. Net investment in the UK market is still dominated by overseas buyers and industrials, offices and residential outside central London remain favoured.
Watch the video below to hear from Richard Gwilliam, Head of Property Research, on the drivers behind the UK real estate market.
Nordic, CEE and Southern European logistics markets offer better potential for attractive returns, according to M&G Real Estate research.
Here at M&G Real Estate, we forecast rental growth for logistics markets across Europe using our analysis of the physical and digital drivers increasing demand for logistics space. This includes infrastructure development across Europe and we reweight the European Commission’s Digital Economy and Society Index (DESI) to just those factors most relevant to logistics. We analyse the most attractive markets in terms of value and long term rental growth prospects.
Looking further afield for opportunities reveals edge of Central Business Districts as offering attractive fundamentals and value.
The recovery in Europe continues to boost employment and the office market. Tight supply has driven rental growth, supporting capital values. Attractive pricing for investors can be found at edge of Central Business District markets, whilst offering affordability for occupiers. We discuss:
- Stronger rental growth prospects exist in particular sub-markets
- Higher connectivity, a city’s digital and physical infrastructure, should support real estate fundamentals
- Technology influences occupiers’ profile and preferences
The outlook for Asia Pacific growth has improved and the region is expected to lead globally, but this largely depends upon China.
Rental growth is anticipated to remain modest for the majority of markets, given most sectors are expected to be in the mid-to-late part of the rental upcycle. Brisbane office market may be best positioned for a cyclical recovery, while offering relatively higher spreads to government bonds. Under allocation to Asia Pacific should continue to fuel demand for the regional property market, despite historically low yields. Amid rising interest rates, investors should look to market-sectors offering a higher yield spread to local bonds.