Real estate bounces back

Our poll of more than 200 real estate sector leaders controlling assets worth over GBP 500bn, reveals 64% are either optimistic or very optimistic about the market outlook, with 71% expecting a bounce back to pre-pandemic levels by 2023 at the latest.

In the midst of the UK’s winter lockdown, during a bleak February, top real estate adviser Knight Frank took the business world by surprise by stating that there was GBP 43bn of global investment firepower available to buy London office property.

Another world-class firm, CBRE, also estimated up to GBP 45bn is still ready to be poured into the London market, and office transactions completed in the first half of 2021 were at or near pre-pandemic levels.

Share prices of London office-focused REITs and developers – such as Landsec, British Land, Derwent London, Great Portland Estates and Helical – were at, or near, 52-week highs as summer 2021 began, even as millions of people continued to work from home.

What explains this counter-intuitive positivity in the real estate market? The answer – vaccination, with real estate shares rising by more than 10% in a day when the Pfizer vaccine’s successful trial results were announced. But the rebound is also being propelled by the impact of tech and the appeal of the best sustainable developments.

The picture is the same across continental Europe, with real estate broadly maintaining its appeal: Aberdeen Standard reported that EUR 247bn of deals were completed in the first quarter of 2021, and EY’s `European Attractiveness Survey’ was also upbeat.