Importance of environmental credentials grows for property investors: Savills
Despite the pandemic challenges of 2020, the rising importance of environmental credentials for property investors will continue to grow, according to Savills.
Across the globe, governments are making “climate emergency” declarations and commitments to meeting net zero carbon in certain timeframes, the Savills update on 2021 noted.
“Real estate is under the spotlight as the built environment accounts for 40% of carbon emissions across the world,” Sophie Chick, the head of department, Savills World Research wrote.
“This will present challenges but it’s also an opportunity for real estate investors to make a significant difference,” she noted.
It noted sustained economic recovery was now on the horizon, led by advanced economies where vaccines are being introduced first.
“This should fuel wider real estate investor confidence,” Chick forecast.
Global GDP growth in 2021 is forecast to be the fastest in 40 years, according to Oxford Economics, albeit only enough to return global GDP to pre-crisis levels.
The report noted many advanced economies have taken a ‘whatever it takes’ approach to supporting economies, with ultra-low interest rates and quantitative easing programmes.
“These low interest rates will support real estate investment into 2021.
“Unlike during the global financial crisis, banks today are less geared, while non-bank lenders have expanded significantly.
“This provides borrowers with greater options in the recovery,” Chick suggested.
It noted travel restrictions and broader economic uncertainty led to a fall in deal volumes in 2020.
In the 12 months to November 2020, global investment volumes were down by 28% compared to the same period in 2019, although not all sectors felt it equally.
The industrial and residential sectors saw more modest falls in volumes, gaining market share to capture 21% and 28% of total investment, respectively (see chart).
“The resilience of these sectors in the face of structural change means that’s a trend likely to continue in 2021.
“In spite of near-term uncertainty, the long-term appeal of real estate has held for investors, and the number of funds targeting it have continued to rise,” the report co-written with Paul Tostevin, director, Savills World Research noted.
The Savills report noted at the beginning of Q4 2020, there were more than 1,000 funds in market – more than double the number in January 2016, according to Preqin.
Funds are now targeting almost $300 billion of investments.
“This suggests investor momentum moving into 2021.”
“Residential may attract a growing share of global investment, supported by strong underlying fundamentals and cross-border investors growing and consolidating portfolios.”
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