At the start of the year, EPRA held its flagship Insight events in a virtual format across four markets: London, Brussels, Paris and for the first time Germany. Industry leaders discussed the market outlook for 2021, with the big debate being about how the pandemic will impact the real estate sector at large going forward.
2021 was deemed to be a year of further uncertainty and transition, with the global rollout of the vaccines, massive EU stimulus package and ECB purchasing programme, as well as the end of negotiations around Brexit. Whilst the EPRA-commissioned Oxford Economics report foresees a return to pre-crisis level at some point in 2022, speakers across all markets shared an optimistic view about the resilience of the European listed real estate sector.
From working from home to e-commerce, passing by digitalisation, none of these concepts are new. There is a broad consensus that these trends were in part already anticipated, and what the pandemic did was massively accelerate them. And while some sectors feel the pressure more than others, and some markets may never return to pre-Covid-19 levels, the general feeling is that a sustainable level will be recovered sooner rather than later.
Take the example of the office market; research shows that 85% of the global population wants to work from home not more than one or two days per week. “Humans are social beings. And working alone is not necessarily the same as working from home,” participants heard.
The focus, however, has shifted: the main question now is how to create a working environment where people want to be. It is not anymore about open landscape architecture and accommodating more people into less square meters; the future of the office sector will be much more employee-driven.
A shift of focus on people did not only happen in the office sector. Panellists agree that residential, student housing and retail sectors have seen a refocusing of the conversation around customer relationship. Deeper strategic customer relationships, with an emphasis on innovation and technology, is what is believed to drive success in the long-term.
While the logistics sector is currently in what one can call a ‘perfect storm’, with online sales at the heart of the growth, self-storage is still underdeveloped in Europe. According to Bank of America, the Covid-19 crisis accelerated the penetration of e-commerce by four to five years, with the volume of packages growing by 75% between 2017 and 2021 and expected to grow by another 75% by 2025. New platforms, like Instagram, have become the main e-commerce drivers, but physical stores are still very much needed, with outlets, destination-led retail and community-based retail leading the way.
On the back of the success of the logistics sector appeared a new distribution challenge linked to ordering food online. Panellists in Brussels wondered if we would see this trend continue to accelerate and if this could be a starting point for a new sub-asset class in logistics.
Overall, while 2020 has been a tough year for our sector, the listed real estate sector has shown tremendous solidarity and generosity in supporting its tenants and local communities and plans to continue doing so in 2021 and beyond. Everyone is expecting to see a real estate sector more flexible, connected and resilient emerge from this crisis.