Asset Manager predicts commercial property returns will be over 20% this year


According to asset manager DWS Group, 2021 should be a brilliant year for commercial real estate. A combination of strong economic growth, low real bond yields and rising inflation “are key factors for robust property performance,” the company said in a statement. According to the company’s forecast, the rate of return should be more than 20%.

“It was a very short-lived real estate recession [during the pandemic], for sure, ”Todd Henderson, DWS Group’s Head of Americas Real Estate, told “The downward cycle has been much shorter than we have seen in previous recessions.”

The divergence in performance between the real estate sectors was also noteworthy. It was “the most significant we’ve ever seen,” says Henderson, pointing to industry as a “clear winner” and retail as a “laggard.”

The industry “has never seen a setback from the Covid pandemic recession,” notes Henderson. “Most of all, that was the dramatic shift in supply chains to support e-commerce.” Before the pandemic, e-commerce had accounted for between 11% and 13% of retail sales, peaked in the mid-1920s and then declined slightly. “But it’s still almost twice what it was before. This leads to an industrial demand and a significant part of the industrial demand. “

The industry was also driven by the move to onshore manufacturing, Henderson believes, given disruptions in global supply chains and limited domestic inventory. “We assume that demand will continue over the next few years,” he says.

Rental housing was “close to second” and the sustained result of a pre-pandemic accelerated trend in 2020. “We are seeing a significant increase in rents and the elimination of concessions for apartment buildings in suburbs and increased demand for apartment buildings in cities,” he says. “We like renting a single-family home very much.”

The convenience retail sector, such as grocery stores, pharmacies, and other on-demand tenants, performed well and “is not a bad place to do opportunistic purchases,” said Henderson.

While offices will experience more activity as people return to traditional work environments, it is still difficult to predict what the results will be as many employees want to keep working from home.

But overall, “we have a low interest rate environment and a growing economy,” says Henderson. “These factors are generally good for real estate. It offers yield, total return and a hedge against inflation. I think that’s why people are interested in the industry today. “


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