Outlook 2021 Building resilience in global real estate portfolios - Savills Investment Management
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Outlook 2021 Building resilience in global real estate portfolios
OUTLOOK 2021
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savillsim.com
A message from the Global
CIO and Deputy Global CEO
Outlook When we entered 2020, we could have not anticipated
2021
how different this year would turn out to be. The global
COVID-19 pandemic has radically changed the way we
live, work and play. Some of the major central banks
have implemented a ‘whatever it takes’ policy to save
economies, lowering interest rates to around zero
and conducting large-scale asset purchases through
quantitative easing programmes. Meanwhile, global
GLOBAL CONTACTS sovereign debt levels continue to grow.
While containing the spread of the pandemic will remain
Kiran Patel the focal point, other challenges also lie ahead in 2021.
Global CIO and Deputy Global CEO The impact of the UK leaving the EU will come into full
kiran.patel@savillsim.com effect. There are climate-related risks, rising inequalities
and continuous geopolitical tensions all of which could
Andreas Trumpp threaten global stability. Embracing disruption to
Head of Research, Europe protect existing portfolios and identify new investment
andreas.trumpp@savillsim.com opportunities is, therefore, ever more important. Part of
this involves capitalising on structural trends that have
accelerated as a result of COVID-19.
This year for the first time we have conducted a survey
Matthias Düsing for our Outlook publication. Some 45% of investors
matthias.duesing@savillsim.com expect that real estate investment will increase over
the next 12 months and 25% expect investment to
stay the same. The even lower-for-longer interest rate
Judith Fischer environment leaves investors with less choices to meet
judith.fischer@savillsim.com their return targets. Given the challenges facing financial
markets, we believe investors need to look at alternative
asset classes with more attractive risk-adjusted returns.
Matteo Vaglio Gralin Real estate has the characteristics and fundamentals to
matteo.vagliogralin@savillsim.com take advantage of this secular shift in capital markets.
The Savills Investment Management Outlook 2021 report
Benedict Lai features our views on the commercial property markets,
benedict.lai@savillsim.com serving to help investors build resilience in global real
estate portfolios in these unprecedented times.
Hamish Smith Kiran Patel
hamish.smith@savillsim.com Global CIO and Deputy Global CEO
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Contents 38.
House views: Europe
06. 18. BELGIUM
PAGE 38
IRELAND
PAGE 43
PORTUGAL
PAGE 48
Our top commercial A new ‘mixed-working’ approach DENMARK ITALY SPAIN
real estate investment means physical offices are here to stay
PAGE 39 PAGE 44 PAGE 49
FINLAND LUXEMBOURG SWEDEN
picks PAGE 40 PAGE 45 PAGE 50
FRANCE NETHERLANDS UNITED KINGDOM
PAGE 41 PAGE 46 PAGE 51
08.
GERMANY POLAND
PAGE 42 PAGE 47
Risks and 28.
opportunities Spotlight on the ‘S’ in ESG
in 2021 52.
Asia-Pacific on a path to a new
14. 30. normal fraught with volatility
Technology as disruptor
Investors will
and facilitator
increasingly look to
move up the risk curve 56.
20. 22. 34.
House views: Asia-Pacific
European Defensive food AUSTRALIA SINGAPORE
Market turbulence creates
PAGE 56 PAGE 58
logistics to and discount JAPAN SOUTH KOREA
remain retail subsectors interesting opportunities in PAGE 57 PAGE 59
‘investors' show resilience real estate debt investment
darling’ in 2021 to disruption
60.
36. Industrial a bright spot amid
24. European occupier and pain of ‘pandemic pause’ to
‘Living’-focused alternative asset investment markets to US commercial property
classes on the rise remain subdued into 2021 market activity
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Our top commercial real
estate investment picks
EUROPE ASIA-PACIFIC
Office Logistics Office Logistics
• Multi-let core/core plus office buildings near • Core/core-plus assets with a strong long-term • Fringe-of-CBD or Grade B properties in prime • Logistics properties across Asia-Pacific,
transport hubs in CBD locations and well- covenant in the main logistics clusters across locations to carry out value-add/ core-plus particularly last-mile distribution and fulfilment
established city fringe locations across Europe Europe opportunities in Singapore and Seoul centres owing to strong secular trends
• Long-income core office opportunities • Modern distribution centres along the main • Offices in regional Japanese cities as occupiers • In markets with a shortage of modern logistics
in regional cities mainly in Germany, the motorways and transport networks such as the become more cost conscious facilities amid rising land prices suggests
Netherlands, Poland and France North Sea-Baltic, the North Sea-Mediterranean opportunities to create mixed-use logistics
and the Atlantic corridors facilities such as cold storage and general
logistics facilities
• Logistics facilities in regional markets in well-
connected locations in France, Germany, the UK
Retail • Urban logistics units and multi-let assets close to
• Larger food anchored retail parks and
large and densely populated areas across Europe
Retail
Residential
neighbourhood centres in metropolitan areas of • Opportunities to acquire underperforming
Tier 1 and Tier 2 cities across Europe smaller sub-regional shopping centres
to reposition as neighbourhood centres
Alternatives
• Daily goods and grocery retail formats such as
particularly in Australia • High quality assets that offer stable income
supermarkets and food discounters in urban
streams, such as the Japanese multifamily
areas across Europe
residential sector
• Residential, particularly build-to-rent multi-family
• Destination and convenience segments of the
buildings and student accommodation in the UK,
outlet centre market in Western Europe
and healthcare and senior care facilities in Italy,
providing long-term, stable income returns
Real estate debt
Real estate debt • Funding gap opportunities in the debt
• Debt investing can provide an attractive, robust and mezzanine loan space in Australia
income-based return underpinned by European
property, which will exhibit lower volatility than
in the previous cycle correction
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Risks and opportunities in 2021
FIGURE 1: WHAT WILL BE THE MOST SIGNIFICANT POLITICAL CHALLENGE FACING THE WORLD IN 2021? (% OF RESPONDENTS)
50%
The EU Recovery Fund offers the chance for Brexit – changes ahead, deal or no deal 40%
further political integration
With only around 40 days (at time of writing)
Europe’s political fragmentation is a reality at until the UK’s Brexit transition period is due
30%
both the national and EU levels. The COVID-19 to expire on 31 December 2020, negotiations
crisis has revealed the limits of the EU, which continue. While an agreement is in both
operates as a technocratic administration sides’ interest, with time running out and
20%
parallel to rather than sovereign over differences remaining on a few key issues there
respective nations. Competing social models remains a risk that negotiations will reach an
have been more or less able to respond to the impasse and negotiators will fail to strike a
10%
health crisis, resulting in tensions between deal. Such an outcome would be an economic
countries for several months. blow for both the UK and EU as the imposition
of tariffs increases the cost of imports.
These have partially relaxed with the agreement 0
China tensions Political unity in The UK’s post-Brexit Maintaining Middle East Other
on the EU Recovery Fund in July 2020. New That said, the hit to GDP for both parties with the US the US post the settlement with unity within tensions
presidential election the EU the Eurozone
balances, coalitions and counterweights have would be small in comparison to the impact
emerged. Nonetheless, political turbulence of the pandemic. Even if a deal is reached, Source: Research conducted on behalf of Savills Investment Management by PollRight among 122 institutional investors in September 2020.
is set to continue throughout 2021, as Investors came from a global database, centred around North America, the UK and Continental Europe, and held an average AUM of GBP 18.9 billion
businesses will face a different trading (USD 25 billion) in real estate investments.
economic, geopolitical and social challenges environment as customs checks are Note: Multiple answers were possible.
as well as climate-related risks still need to be introduced, potentially disrupting supply-
addressed. The compromise on the Recovery chain times, and UK financial institutions
Fund points to a further integration process are faced with a less secure equivalence
of the EU; however, due to a second wave regime. For property markets, long-term
of infections across Europe and discussions changes are likely to be more important Geopolitical tensions continue to
on fund governance, the package might be for occupier demand, including the put global economy at risk
delayed, or countries might reconsider the impact of new technology and increased Broadening our focus to global
loans component. agile working. geopolitics, bilateral tensions that
have intensified since the start of
the COVID-19 pandemic will likely
continue into 2021. Aside from
US presidential election leaves the country divided the US-China trade war, which is
considered the most significant
political challenge in 2021, according
Of course, 2020 represented a political turning point for the US as well as the UK. As feared, the US
to our investor survey, geopolitical
presidential election remained undecided after the first highly anticipated election night, but unforeseen was
tensions have escalated globally
the four-day election mini-series that would ensue. Although Joe Biden won the election, the race to win the
(figure 1). The refugee crisis is
US Senate will not be decided until January, with two run-off elections in Georgia. If the Republicans manage
currently flying under the radar
to maintain control of the Senate, a divided Congress could hamper Biden’s presidency. Hopes for major
but could flare up again quickly,
infrastructure spending such as a ‘green new deal’ will be tempered, with further fiscal stimulus packages
particularly if tensions between
likely to be scaled back.
Greece and Turkey regarding gas
However, President Elect Biden’s proposed corporate tax increases may now be less likely, too, which could fields in the east Mediterranean Sea
help support the economic recovery. In our view, the election result will not have an impact on the global tighten further. Risks are tilted to the
real estate markets at least in the short term, with the impact from the COVID-19 pandemic more likely downside overall in 2021, which may
to a be a significant driver of occupier markets. We think investors are well-advised to focus on market affect corporate expansion plans.
fundamentals, economic and interest rate cycles as well as longer-term trends such as urbanisation, climate For instance, firms such as Nike,
change, digitisation and technology. Apple and Samsung Electronics
are reducing reliance on China to
mitigate geopolitical risks.
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Reshoring – a boost for the industrial and logistics sector?
While the pandemic presents a reversal of the trend to offshoring Where there could be some
number of downside risks for the would be positive for industrial increased demand opportunities
global economy and commercial and logistics occupier markets. in the short term would be if firms
property markets, it could also But reshoring usually entails higher look to hold more inventory in
provide an opportunity for production costs due to higher order to minimise supply-chain
increased industrial and logistics wages. Therefore, the key question disruptions. But this would likely
demand. And not one related to is, how much are consumers be a one-off boost, with regional
increased online penetration. prepared to pay for more markets such as Central and
localised production? Eastern European countries most
COVID-19 has exposed the likely to benefit. The CEO of
fragile nature of today’s supply Given the already complex nature Prologis, the world’s largest
chains, reigniting a debate of global supply chains, we think logistics investor, has suggested
around (de)globalisation and that the near-term opportunities that just-in-time supply chains
the possibility of firms reshoring1 from reshoring are limited, could become just-in-case supply
production capacity. The trend of particularly in high-wage developed chains, with companies carrying
manufacturers relocating at least markets. We think that it is more 5-10% more inventory in the future.2
some production back or close likely that companies will seek But like reshoring, the extent to
to domestic markets can have to increase the resilience of their which this boosts occupier demand
commercial benefits – diversifying supply chains by diversifying across will depend on firms’ trade-off
suppliers to reduce possible supply low-cost countries, which could between the costs of holding
chain disruptions, shortening benefit industrial and logistics higher inventories and supply
transport times and aiding to demand in other parts of Asia chain disruptions.
reducing carbon emissions. A (away from China).
A slower-than-expected economic recovery
As economies reopened after social distancing and/or local
COVID-19–related lockdowns, lockdowns risk undermining
global activity started to recover consumer and business confidence,
quickly. The US for example, had holding back spending and
regained around 66% of lost investment decisions. This would
output by the end of Q3, while the be negative for commercial
Euro-zone had made up around property occupier markets and
70% of its fall in GDP. But with near-term rental growth prospects.
many countries experiencing In particular, the retail and leisure
second waves of infection and sectors look particularly exposed
localised lockdowns, various to lower footfall and soft consumer
indicators suggest that recovery demand, as well as the office sector
momentum is losing steam sooner- if firms put off expansion and
than-expected. Indeed, a number re-location decisions.
of forecasters, including the
International Monetary Fund have That said, should the recovery start
cut their outlook for 2021. to stall, this will almost certainly be
met with more support from central
With unemployment rising and the banks, either in the form of interest
strength of the recovery still very rate cuts or additional quantitative
dependent on the path of the virus easing. The possibility of even lower
and the speed at which a vaccine government bond yields would be
might be available, we could yet supportive for capital flows into real
see further downgrades for growth estate as investors seek relatively
in 2021. Prolonged periods of higher returns.
1
Offshoring/reshoring is defined as shifting production or service facilities away from or closer to the domestic market.
2
Nareit, “Prologis CEO expects shift away from lean supply chain strategy post-COVID”, 30 July 2020.
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Will financial market volatility be a boon for real estate?
To mitigate the impact of COVID-19 on economies, countries
have introduced fiscal stimulus measures to support
companies via credit guarantees, and workers through
subsistence payments. At the same time, some of the
major central banks have implemented a ‘whatever it takes’
policy to save economies, lowering interest rates to around
zero or ventured into negative territory and are conducting
large-scale asset purchases through quantitative easing
programs boosting up their balance sheets (figure 2).
FIGURE 2: CENTRAL BANKS BALANCE SHEETS TO GDP (%)
140 Due to the significant amount of need to support private and public with less choices to meet their
spare capacity in the economies, consumption, invest in high-tech return targets. In this new reality,
ECB FED BOE BOJ
inflation is set to remain low, posing sectors, foster infrastructure asset allocators should rather
120
various threats to growth. Until investments, implement structural lower their return expectations
this returns to a sustainable level, reforms and offer incentives for than stretching too far and
100 central banks are unlikely to lift private and corporate investments. making sacrifices on asset quality.
interest rates, meaning bond yields Further, with historically low and
and returns will also remain low. Secular shifts in capital markets negative yields in the bond markets
80
Moreover, the adjustment should be benefit real estate (figure 3) and high valuations in
gradual to give the economy time the financial markets, investors
60 to adapt. In the absence of favourable need to consider to looking at
outlooks for demographics and alternative asset classes offering
Although uncertainty is likely to productivity growth in most attractive risk-adjusted returns in
40
continue in 2021, governments advanced economies, the most order to enhance their portfolios.
may start to gradually cut support likely scenario is a prolonged We believe real estate has the
20 for COVID-19 and move towards a phase of economic stagnation characteristics and fundamentals
model that promotes productivity with low growth and low inflation to take advantage from this secular
growth. To be successful they (‘stagflation’), leaving investors shift in capital markets.
0
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Source: Macrobond, October 2020
FIGURE 3: GLOBAL NEGATIVE-YIELDING BONDS (USD TRILLION) AND AS A SHARE OF ALL BONDS OUTSTANDING (%)
18 Global negative yielding debt (USD trn; LHS) 30
Systemic risks are on the rise
Global negative yielding debt as a share of all bonds outstanding (%; RHS)
16
Global sovereign and corporate debt levels, which were 25
14
historically high even before the current crisis, have been
ballooning. While economic leveraging has helped avoid 12 20
further damage in the short-term, questions are being 10
15
raised about the sustainability of the global debt pile 8
and rising systemic risks in the financial and nonfinancial
6 10
corporate sectors over the longer run.
4
5
Wider unintended consequences, such as the risk of major 2
misallocations of capital towards unproductive segments, 0 0
and the ‘zombification’ of banks and companies have OCT 10 OCT 11 OCT 12 OCT 14 OCT 15 OCT 16 OCT 17 OCT 18 OCT 19 OCT 20
increased. Furthermore, the impact of the rising debt
Source: Bloomberg (October 2020)
burden on future investment capabilities have the potential * Bloomberg Barclays Global Aggregate Negative Yielding Debt Index
** Bloomberg Barclays Global Aggregate Bond Index
to hamper economic growth as well as fiscal resources to
tackle future downturns in the long-run.
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Riskier investments usually experience
greater yield shift at times of market
Investors will
FIGURE 5: WHEN DO YOU THINK THE EUROPEAN REAL ESTATE
MARKET WILL BEGIN TO RECOVER?
stress, meaning they can potentially
deliver stronger returns through a
recovery phase. While core is still
increasingly look to
30%
relevant in many real estate strategies,
pricing expectations were elevated
move up the risk curve
even before COVID-19, already forcing
investors to move up the risk curve.
20%
We believe that a number of investors
are currently re-evaluating their
investment strategies to prepare for
the real estate market recovery phase.
Slightly more than 50% of the surveyed
10% investors expect the real estate markets
in Europe to recover between Q2 and
Q4 2021, as the region began facing a
ANDREAS BENEDICT
second wave of infections in Autumn
TRUMPP LAI
2020. About one-fifth expect a recovery
0% from Q1 2022 (figure 5).
Q3 Q4 Q1 Q2 Q3 Q4 Q1 It will Don’t
There is a big question mark about what real estate will look like 2020 2020 2021 2021 2021 2021 2022 or never know
beyond fully
in a post–COVID-19 world, and what it means for investors and recover We believe that real estate will remain
their strategies. The pandemic has both served as an accelerant Source: Savills Investment Management Investor Survey (September 2020) appealing to investors within the lower-
for real estate trends that were already underway while also for-longer interest rate environment.
challenging traditional notions of various real estate sectors. Indeed, research from Preqin indicates
healthy momentum in fundraising
In an uncertain economic environment with low interest rates, activities, and dry powder ready to
real estate investors are directing more commitments towards be allocated into the asset class in
riskier opportunities. In our investor survey we found that the 2021. 45% of investors we surveyed
majority of respondents believe that value-add, opportunistic FIGURE 6: OVER THE NEXT 12 MONTHS, HOW DO YOU EXPECT expect higher real estate investment
and core-plus investment strategies will be most popular in the INVESTMENT IN PROPERTY TO CHANGE COMPARED TO THE volumes over the next 12 months
wake of COVID-19 (figure 4). PREVIOUS 12 MONTHS? compared to the previous 12, 30%
Decrease dramatically think that investment volumes will
decrease whereas 25% expect no
FIGURE 4: WHICH OF THE FOLLOWING INVESTMENT STYLES DO YOU BELIEVE WILL
5% changes at all (figure 6).
BE MOST POPULAR AMONG REAL ESTATE INVESTORS IN THE WAKE OF COVID-19?
Increase Funds targeting European real estate
40% dramatically have continued to attract investment,
Decrease
11 % moderately with 40 securing a total of EUR 18
billion in H1 2020 despite market
30% 25% uncertainties, according to Preqin. The
market environment in 2021 is likely to
Increase continue to be shaped by high liquidity,
20% moderately
uncertainty and volatility fuelling market
34% polarisation. The stable income, low
10%
volatility and relatively attractive risk-
Stay about
the same return profile of real estate strategies
will help ensure that they see rising
0%
Value-add Opportunistic Core Core-plus Debt Other
25% demand from both income-seeking
investors and those aiming to capitalise
Source: Savills Investment Management Note: Multiple answers were possible. on future capital value growth after the
Investor Survey (September 2020) Source: Savills Investment Management Investor, Survey (September 2020)
current phase of repricing.
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FIGURE 7: WHICH GEOGRAPHIES DO YOU BELIEVE WILL
ATTRACT THE MOST REAL ESTATE INVESTMENT IN 2021?
BELGIUM PAN-EUROPEAN
3% 14%
NETHERLANDS
3% SWEDEN
JAPAN
6 % 13%
UK
FINLAND
30 %
8%
SOUTH KOREA
CANADA 11%
23%
IRELAND
DENMARK
11 %
8% POLAND
FRANCE
GERMANY 7%
10% 17%
PORTUGAL
ITALY
USA
7 %
5% CHINA
33 %
SPAIN 13%
LUXEMBOURG
Against this backdrop, traditional property
strategies are likely to require a rethink. Lease
8 %
5%
flexibility is set to become increasingly favoured
MALAYSIA PAN-ASIAN
22%
by tenants, although the extent to which such
leases provide for items such as break rights, PAN-AMERICAN
7%
8%
rent suspensions and even force majeure – which
are becoming more common as a result of the
pandemic – may negatively impact on valuations SINGAPORE
and risk ratings. Going forwards, lenders and
investors will demand scrutiny around contracts, 19%
including provisions in place and key assurances,
as well as a much more informed, granular
approach to asset selection.
AUSTRALIA
Via our survey we found that investors are holding
back their European real estate allocation plans
14%
in the short-term but remain confident about the
asset class in the longer-term (figure 7). North
America, the UK and Asia currently look more
appealing to investors than Europe. We also
found that investors appreciate pan-continental
strategies across Asia and Europe as this helps Source: Savills Investment Management Investor, Survey (September 2020)
mitigate the impact of volatility in certain markets. Note: Multiple answers were possible.
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A new ‘mixed-
working’ approach
In fact, new research finds, some are likely to become more prevalent. issues, such as social impact, are
46% of UK office workers intend The pressure on costs due to increasingly important for investors.6
to split their working time between greater asset management will
means physical home and the office, while 30% plan
to return five days a week.4 Similarly,
be upwards, but the trade-off
for increased occupier flexibility
Occupiers tend to take office
space in locations that offer good
offices are here
62% of Google employees expressed might limit the fallout we expect transport links, entrepreneurial
an interest in returning to the office to see in property rentals and spirit and universities producing
part-time,5 all of which suggests therefore pricing. a well-educated workforce, which
to stay
a new ‘mixed-working’ approach. reinforces the advantages of
Working in the office versus working In the post–COVID-19 period central locations, as highlighted
remotely are increasingly being employers are also likely to start in our Dynamic Cities Index.7
viewed as complementary options, placing greater emphasis on the Moreover, if people work fewer
rather than an either-or choice. quality of the office environment, days a week in the office, they
including more desk space per might prefer city centre locations
That said, from an occupier employee and more breakout that offer a wider range of services
perspective, the need for more facilities. This is likely to lead and amenities. Central business
flexibility is likely to gain momentum. corporate responsibility to move up district (CBD) offices are, therefore,
JUDITH FISCHER We do see this as an ongoing the agenda even faster than before. one subsector that we believe
characteristic feature of the real While environmental factors have should be a mainstay of any
While many commentators and mainstream media estate market. For example, shorter tended to be the focus of ESG, future diversified real estate
outlets were quick to predict the death of the office when lease lengths or earlier break options our survey finds that ‘S’-related portfolio.
the COVID-19 pandemic first began, the reality is looking
increasingly different. Three of the five ‘FAANG’ tech
companies (Facebook, Amazon, Apple, Netflix, Google),
all of which previously announced that they would allow FIGURE 8: EU OFFICE-BASED EMPLOYMENT GROWTH
their employees to work from home permanently, have
signed office leases in major global cities. Most prominent 2.5%
is Facebook’s lease of 730,000 sq ft (ca. 68,000 sq m) of 2.2% Forecast
office space in New York City.
2.0%
1.9%
2021 will undoubtedly be a challenging year for the office 1.6% 1.7% 1.7%
sector as result of increasing job losses – a consequential 1.6%
1.5% 1.5%
side effect of COVID-19. Weak employment conditions 1.3% 1.2%
will weigh on office space demand and rental growth
1.0%
prospects (figure 8). However, we remain optimistic 0.8%
about the sector in the long-term, as office-based 0.7% 0.7%
0.6%
collaboration is an integral part of productivity, creativity 0.5% 0.5%
and company culture. 0.3%
0.1%
0.0%
The COVID-19 pandemic has accelerated the trend
towards agile working, but physical offices are here to
stay. Most employees want to work in the office, be it -0.5% -0.6%
only for a few days per week, as it serves as a hub for
social interaction, facilitates face-to-face collaboration -0.9%
and improves ingenuity. -1.0%
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
4
British Council of Offices, October 2020 Source: Oxford Economics (September 2020)
5
Google staff survey, The Guardian, September 2020
6
Savills IM Investor Survey, September 2020
7
https://www.dynamiccities.savillsim.com/OUTLOOK 2021
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Insights from Alistair Ennever,
European logistics Portfolio Manager, Savills IM
to remain ‘investors 1. In your opinion, where is the logistics market
heading to in 2021?
darling’ in 2021
It is seen as being amongst the most defensive
products, currently offering long-term sustainable
income supported by underlying occupier demand.
In my opinion, pricing will continue to harden in
2021 in this low interest rate environment as long
as the debt market remains open for business.
The challenges are around availability of product and
increasing logistics-focussed planning restrictions
across Europe. Tenant solvency could become an
MATTHIAS DÜSING issue if the wider European economy is harder hit
than expected.
Logistics is positioned well to online grocery. On the downside, historical lows. In aggregate, we Secular demand drivers have the potential to carry 2. Given logistics is the ‘hottest game in town’
remain a bright spot within the however, economic headwinds are do not think this is indicative of forwards the demand surplus, at least in some now, in which segments do you see the most new
real estate landscape. Backed by weighing on occupier demand, an immediate supply-side risk. market segments. E-commerce has accelerated opportunities?
solid fundamentals and structural leading to overall muted or The shortage of developable since the start of the COVID-19 pandemic, fuelling
tailwinds, investor sentiment is even negative rental growth in land will remain a key challenge additional demand. Income-orientated investors’ I believe that several investors will have to
particularly positive for logistics. some markets. An anticipated in the mature Western European focus is on the consumption end of supply-chains complement their existing core investments with
Among those investors polled economic rebound could trigger markets, where future supply and last-mile distribution warehouses in the key build-to-core strategies where they either develop
in our survey, more than 55% new requirements in the mid- is kept tight by restrictive logistics hubs of Western Europe. In particular, we speculatively themselves or back developers.
are planning to increase their term, though. zoning. In Central, Eastern and see opportunities in: Investors will also start to consider geographies
exposure to the sector in 2021. Southern Europe, on the other previously thought of as more peripheral, like
Oversupply is a potential threat in hand, availability was already • markets with fast-growing online penetration Portugal, Ireland, Denmark and Finland, to
A 'wall of money' will keep pricing some geographies. Completions trending upwards pre—COVID-19, rates — such as Central and Eastern Europe as generate greater returns. Occupier demand in
in the core and core-plus segments have been above their long-term and the overhang of speculative well as Southern Europe – which offer attractive, these markets is also set to improve as nearshoring
challenging. Further yield averages across Europe, while projects will need to be albeit selective, risk-adjusted returns becomes a focus for many supply chains.
compression in primary markets vacancy rates have reached absorbed first. • last-mile and urban logistics, which continue to
such as Germany, France and the attract interest based on the online shopping 3. In the mid- to long-term, what are the biggest
Netherlands also seems likely. boom and the defensive nature of urban trends you are seeing?
We expect the spread between land values
FIGURE 9: RISK-RETURN PROFILES OF EUROPEAN LOGISTICS MARKETS We see continued occupier investment in the
core and non-core to increase
• pronounced value-add and opportunistic automation of their facilities. This has wider
as an outcome of investors’ 6.5
strategies within buy-to-let or build-to-core implications for building design, reliance on labour
excessive ‘flight-to-safety’. Market 6.0 Denmark
Portugal Ireland approaches, where investors are teaming up with and locations. Multi-storey centres are becoming
diversification will be key in 2021 5.5
Expected Prime Return
5.0
Finland
developers to unlock scope for higher returns more prevalent in dense metropolitan locations for
(p.a. % 2020-25)
as well to achieve risk-adjusted UK
4.5 Poland
Average Return
several occupiers as they look to maximise the use
returns (figure 9). 4.0 One e-commerce subsector to watch in 2021 is of logistics assets. Re-purposing of retail assets
3.5 France Sweden online grocery. Still in its infancy, it is showing to logistics is a very exciting trend to watch. We
Investors would be wise to 3.0 Germany
exceptional growth, but requires specific fit-outs
2.5 Netherlands hope to see a continued focus of developers and
consider moving up the risk curve Spain
dedicated to food distribution. The UK, Nordics,
2.0 Italy investors on enhancing the sustainability credentials
to capture capital and income 1.5 Netherlands and Germany will be first-movers in of new and existing facilities. Encouragingly,
growth. New opportunities will 1.0 this growing niche. The main question facing this
5.0 7.0 9.0 11.0 13.0 15.0 17.0 19.0 developers in Europe are integrating ESG into
arise from the reassessment of trend is how fast demand will continue to grow,
Historical Risk (Standard Deviation 2000-19) their design and build processes to deliver suitable
manufacturing supply chains, how supply can deliver suitable solutions and,
Source: PMA (October 2020), Savills Investment Management (October 2020) product to the market.
and accelerating trends around ultimately, whether current valuations and forward
e-commerce, urban logistics and pricing anticipations based on these are justified.
8
Property Market Analytics (October 2020)
9
Local brokerage companiesOUTLOOK 2021
22 23
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In fact, investors with a defensive investment approach
have been able to benefit from stable and inflation-
Defensive food and discount
linked income returns in the grocery retail sector.
This is reflected in our investor survey. Food retail
is the only segment of the retail sector where investors want
retail subsectors show to increase rather than decrease their exposure (figure 10).
resilience to disruption
We think integrated food retail facilities in growing urban
locations close to customers seem to be best placed to
outperform in this context. Investors should be able to
achieve attractive yields, particularly since there is the
opportunity to increase capital values by adding student
housing, residential or other uses on top of such assets in
densely populated cities.
The outlet segment seems to have recovered well after
ANDREAS TRUMPP
the COVID-19 lockdown period, particularly those schemes
with strong management. However, centres that rely on
Brick-and-mortar retail has been tourism continue to be challenged by lower turnover levels.
in a very difficult position since
long before the beginning of the FIGURE 10: WHICH OF THE FOLLOWING RETAIL SECTORS DO YOU Outlet malls in areas without broader travel restrictions
BELIEVE WILL SEE THE GREATEST INCREASE AND DECREASE IN and where international tourism is not a major factor have in
COVID-19 crisis. Almost all non- INVESTMENT IN 2021 COMPARED WITH 2019 AND 2020? (RATIO OF
food retail units were closed 'INCREASE' VERSUS 'DECREASE' RESPONSES) some cases produced stronger sales than the same period in
across large parts of Europe 2019. This is partly due to some latent spending power, but
15% 15%
during March and April. This has also to consumers feeling safer in the outlet environment,
10% 10% which normally offers outdoor shopping and parking as
prompted some important
changes in retailer business 5% Retail Shopping High 5% well as a secure, well-managed experience. We maintain
Parks Centres Street Units
strategies. For example, a number 0% 0% our view that attractive risk-adjusted returns are still
Food
of retailers are planning to notably -5% Retail -5% available for investors if they focus on destination and
shrink their store networks to -10% -10% convenience segments of the market.
reduce the rental burden of -15% -15%
physical shops. They are now -20% -20%
placing greater emphasis on
-25% -25%
their e-commerce strategies, with
far-reaching implications for the
-30%
-35%
-30%
-35%
Insights from Ian Jones, Director, Investment, Savills IM
retail property market.
Source: Savills Investment Management, Investor Survey 2020 1. In your opinion, will online ever have the chance to completely fulfil customer needs in grocery?
This has magnified concerns There are clear reasons why online is struggling to replicate the customer’s in-store experience. For grocery
that many real estate investors shopping, freshness matters and hand picking – i.e. the customer’s preference to see, touch and choose
already had about investing in as groceries are nondiscretionary Supermarkets and food-anchored the product – is still key. Research suggests that in Europe, customers typically purchase on the day of use.
retail. However, more nuanced purchases. We think investors retail park valuations do not look Online cannot accommodate impulse purchases either.
consideration seems advisable. should focus on grocers with overly stretched in the context of
2. But isn’t online grocery shopping more convenient for customers?
Some formats, such as food the best in-store and online other retail segments and appear
In a lot of cases, timed deliveries are not convenient. Most customers would prefer to make a quick stop
retailing and outlet malls, continue offerings, since e-commerce is particularly attractive compared
at their grocer when returning from work than being obliged to stay for a timed delivery. And generally, it
to be resilient to e-commerce also rising in the grocery segment. with risk-free rates. While average
is about more than food. Most supermarkets offer a range of complimentary impulse goods, and adjacent
trends. Shopping centres and Most leading supermarket prime property yields are still
services include banks, coffee shops, dry cleaners and alcohol stores.
certain high street properties, on and discounter chains are close to record lows, the average
the other hand, do not provide already implementing protective pan-European prime supermarket 3. Is there a cost advantage for either the customer or the online grocer?
the required stability that measures such as enhancing yield stood at about 5.3% in Customers prefer comparison shopping in store to get the lowest prices. National infrastructure does
security-orientated investors are the customer experience, September and is likely to not work for grocery, so an online grocer must have a warehouse in every major urban area with a fleet
currently seeking. optimising in-store technology compress further in 2021. This is of vehicles. This is putting pressure on margins, which is why the home delivery model generally erodes
and developing omnichannel more than 500 basis points above profitability — even with a fee.
Grocery retailers benefit from strategies to future proof their the average European 10-year
relatively resilient income streams store networks. government bond yield.OUTLOOK 2021
24 25
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‘Living’-focused STUDENT HOUSING/PURPOSE-BUILT STUDENT ACCOMMODATION (PBSA)
alternative asset Rising demand for higher education
is underpinning the growth of the
The growth of the student market
has boosted investor interest
Despite a steady increase in
availably, the provision of PBSA
classes on the rise
student accommodation sector. in stable, long income streams. beds hasn’t matched demand.
In the EU, for example, the number Between 2010 and 2015, investment Across Europe, the number of
of full-time university students averaged EUR 3.2 billion per annum. PBSA beds per 100 students is
rose by over 1 million between 2013 This more than doubled to EUR 7 low, even in markets like the UK
and 2018.12 billion p.a. between 2016 and 2019.14 which is considered to be more
mature than other European
Governments’ desire to increase While COVID-19 has raised markets. Data from Bonard show
higher education attainment questions about near-term demand that less than one in three students
has supported this trend. The given the prospect of lower onsite in the UK has access to a PBSA bed.
European Union’s Europe 2020 student numbers this year, students This falls to one in ten in Germany
strategy, for example, aimed have generally been keen to get and less than one in twenty in Italy
to have at least 40% of 30-34- back to university campuses. and Portugal (figure 11).15
year-olds complete a higher While teaching models are likely to
education course. adapt to technology, the prospect While it is important to take into
of in-person knowledge transfers consideration local conditions in
HAMISH MATTEO
In addition, the global shift towards leading to creativity and innovation university markets, the student
SMITH VAGLIO GRALIN
a service-based economy, along – not to mention perhaps the most housing market can provide
with digitalisation and automation, appealing aspect of university for appealing opportunities for long-
With interest rates at rock bottom and returns on have highlighted the importance of many, social interaction – means term investors.
traditional property assets – office, industrial and retail higher education for young people students are likely to demand more
– low, investors are looking to alternatives. to compete. Increased mobility than just online lessons in the future.
and the rise of the middle classes
Between 2010 and 2014, investment in alternative in developing countries, who have
assets averaged EUR 30 billion per annum (p.a.) across a strong appetite for top-ranking
Europe. This rose to EUR 82 billion over the next four universities, have underpinned
years, with its share of total commercial property demand from foreign students –
hitting 32% in 2019, up from 19% in 2010.10 Apartments 40% of the world’s top universities
NETHERLANDS
and hotels have been the dominant alternative sectors, are in Europe.13
accounting for close to 80% of such investment in 2019.
16 GERMANY
The attraction of different commercial property assets That said, alternatives are not as straightforward
FIGURE 11: PBSA PROVISION
RATE % (PROPORTION OF
13
– such as hotels, student housing, senior living, build- or transparent for investors as offices or industrial BEDS TO STUDENTS) UK
31
to-rent or life sciences – is not just in their potential assets, presenting unique challenges. Indeed, a shift Source: BONARD
(October 2020)
for higher returns, but also in their long leases that to more operational real estate may take some
offer stable income returns. They can also present an investors out of their comfort zone. The European POLAND
opportunity for inflation-linked rental growth, which is market also varies enormously by asset type, IRELAND
12
19
particularly appealing for the likes of pension funds. depth and maturity. For example, investment in
apartments totalled EUR 53.6 billion in 2019, student
Alternatives are not just about higher returns. They accommodation transactions were worth EUR 9.4 SPAIN
7
can also offer counter-cyclical characteristics. Take, for billion and self-storage just EUR 183 million.11 AUSTRIA
11
example, that during normal downturns, demand for
PORTUGAL
higher education often increases, boosting the appeal We think that the following three ‘living’ sectors, benefit
of student housing. Alternatives also allow investors to
diversify risk.
from strong underlying structural trends that provide
long-term investors with appealing opportunities.
6 FRANCE
ITALY
14
12
Eurostat, September 2020
5
13
The Times higher education 2020 rankings
14
Real Capital Analytics, September 2020
10
Real Capital Analytics, September 2020 15
BONARD, a PBSA and living sector research
11
Real Capital Analytics, September 2020 and data specialist, October 2020OUTLOOK 2021
26 27
savillsim.com
BUILD-TO-RENT (BTR) RESIDENTIAL ACCOMMODATION
Like other ‘living’ sectors, BTR is safe haven asset, as rental income tends
supported by long-term demand drivers. to be more secure than in other sectors.
In particular, rising urbanisation, smaller In the near term, the economic downturn
households and affordability constraints is likely to limit rental growth prospects.
to home ownership are forcing younger Consideration also needs to be given to
people to rent for longer before potential changes in tenant expectations
purchasing their first home. as a result of experiences from COVID-19 FIGURE 12: PROPORTION OF 75+ POPULATION, AS A % OF TOTAL POPULATION
lockdowns. This could include greater
Italy
These trends explain why institutional demand for balconies, larger communal
residential investment in Europe has areas or the provision of space to work
Spain
more than doubled since 2014 to EUR from home.
54 billion in 2019. Admittedly, Germany Germany
– one of the few European countries While tenant preferences might change,
with a well-established institutional we do not anticipate any major shifts in France
BTR sector due to the low proportion the underlying demand drivers. These
of home owners – accounted for 34% of will continue to underpin the need for Netherland
2050
this. Even so, average investment there good quality, institutional BTR residential
2019
rose from EUR 5.7 billion between 2010 properties. As such, we believe that Poland
and 2014 to EUR 15.5 billion between the BTR sector will continue to offer
2014 and 2019.16 investors good long-term investment UK
potential. More so now, given net yields
Stable, long-term income returns in the in this sub sector are on a par with Sweden
sector are also appealing for investors. prime office and logistic yields. An aspect 0 5 10 15 20 25
During times of economic turbulence, that was not the case 5-10 years ago. Sources: Savills Investment Management, Oxford Economics (August 2020)
residential property is often viewed as a
SENIOR LIVING
The senior living sector has been In the near term, therefore, it is life expectancy has been steadily
impacted by the COVID-19 crisis all about finding an asset that is increasing for many years; baby
throughout 2020. We expect that resilient to regulatory changes and boomers are entering retirement
the sector will continue to suffer that has the capacity to manage age and given their high-income
by weaker demand from residents, crisis situations such as COVID-19. potential they expect a good quality
higher costs and a less dynamic Fund managers must negotiate of life. On the supply side, the
investment market into 2021. an attractive entry price. Demand provision of new developments is
may remain moderate, if increased low on average. The recovery will
To put prospective residents more operating costs leads to higher costs start once there is some degree
at ease, safety standards must be for residents, especially if they rise of certainty about the COVID-19
reviewed and enhanced. In the above the average pension income. outlook. Moreover, a transformation
meantime, weaker demand for beds may be on the horizon in the form
will detract from income. The risk of Nonetheless, we remain positive of increased privatisation. Investing
increased regulation is also likely to in the long term about this sector. in this sector is a strong buy for
add further cost pressures on the There is a substantial imbalance players who want to move up the
sector, both in terms of labour and between demand and supply. The risk curve and add value-add
operating expenses. population is aging (figure 12); elements to their portfolios.
16
Real Capital Analytics, September 2020OUTLOOK 2021
28 29
savillsim.com
But the ESG focus is starting to change. Investors increasingly demand concrete
evidence of what firms are doing in relation to S and G issues. This is not surprising
Spotlight on
given concerns around ‘greenwashing’ – the claim that a product or strategy
is ‘greener’ than its reality. Additionally, poor governance can increase risks for
investors, especially if an investment is linked to unethical or misleading business
the ‘S’ in ESG practices. There has also been a marked shift in investor mindset, with an expectation
that businesses and investors will make a positive contribution to society, not just
to shareholders.
We asked Lucy Winterburn, Director, Investment, Savills IM, about how S
issues are evolving and becoming increasingly important for real estate
investors.
The focus of ESG in the real estate industry has tended to be on the E,
but this appears to be changing. How are you seeing investors views
HAMISH SMITH
towards S and G issues evolving?
Social and governance issues are racing up the agenda, with more and
Environmental, social and governance issues (ESG) more investors wanting to know what we are doing on the social side to
have become a hot topic in the property world as make a real positive contribution. And not just for Savills IM as a business.
investors increasingly consider the impact of real Investors also want to know how we ensure that their assets and their
estate on the environment and people who live, tenants can make a positive impact too.
work and play in built space. It is not just financial
Can you give an example of how Savills IM is supporting clients and
returns that drive investment decisions today.
tenants with their social goals?
Investors also want greater transparency around
environmental and social responsibility from their At one of our recently completed industrial logistics scheme in Didcot, UK,
managers and advisers, and the businesses in we included generous green space, encompassing a walking and running
which they entrust their money. track, landscaped garden and water features and an amphitheatre for
workers to enjoy. Amenity space for workers only tends to be considered
This reflects a growing recognition of changing in the office sector, but there is no reason why it shouldn’t be a key
societal concerns and the recognition that ESG consideration in other sectors as well.
factors can play a positive role in a corporate
context, such as via improving and protecting Does a lack of measurability or industry standardisation hold back S
brands, attracting and retaining talent, and issues from being on more equal footing with E?
reducing long-term risks.
It definitely makes it harder to quantify betterment and to compare apples
with apples, but ultimately, that isn’t an excuse. We must demonstrate 'S'
In the real estate industry, ESG has tended to focus
impact considerations in our strategies. It would be foolish to ignore the
on environmental sustainability considerations –
tidal wave of interest in this area – investors have choice.
E factors. Increased awareness of climate change,
legislation aimed at reducing carbon emissions
Small businesses often say that they don’t have the resources to focus
and initiatives such as net-zero carbon have
on ESG issues. How does Savills IM help them to make an impact?
underpinned this. At Savills IM, for example, the
need to consider the lifecycle of a building, in both We have many smaller tenants who we engage with to try and understand
development and use, in order to truly embrace what we can do to support their ESG agenda and local community
net zero carbon means that design teams are needs. ESG initiatives don’t have to be grandiose and expensive – simply
challenged to make specifications that will future improving recycling, installing more efficient lighting or supporting a local
proof new assets. food bank can all have important positive impacts. Collaboration is of
paramount importance to this success. One of the few positive outcomes
Measurability also explains why E factors have of COVID-19 has been increased tenant engagement across our portfolios,
hogged the limelight thus far. It is far easier to with a recognition that working together can reap rewards for both owner
calculate the amount of CO2 saved by using and occupier.
renewable energy sources than to quantify
whether an employee is being treated fairly or not.OUTLOOK 2021
30 31
savillsim.com
Technology as disruptor SMART MOBILITY AND CONSTRUCTION
and facilitator
Driverless car technology in Some demographic groups
combination with the Internet of may choose to relocate to well-
Things has the power to transform connected satellite suburbs and
the way cities function. In city towns that still offer good amenities
centres, it could release parking and variety of uses, functioning as a
spaces for redevelopment into polycentric system of employment
affordable housing or green public and population distribution. This
areas. In retail destinations, it trend is likely to create more demand
could free up lots for outdoor for decentralised, well-connected
leisure, food and beverage or mixed-use developments offering
alternative uses such as apartments, good quality, affordable housing
flexible office space, self-storage and services. This includes
ERI MITSOSTERGIOU
or last-mile logistics. convenience retail, flexible
Savills European Research Director
workspace, health and wellness
With on-demand automated centres and communal areas.
The real estate industry has been experiencing the disruptive impact of mobility, residential choice will
technology, with implications for occupier requirements, construction, not fully rely on transit hubs Construction technologies that
property management and financing tools as well as transaction and connections, but also on help reduce costs and facilitate
processes, to name a few. The COVID-19 crisis is accelerating change, inter-modality between public flexible space production – such as
putting pressure on the industry to react. Technology will enable buildings transport and car-sharing 3D printing, modular construction
and cities to respond to the shock and recover. services. In combination with the and the use of robotics – are more
rise of agile working, this could take efficient, less labour intensive and
some demand pressure from could relieve high costs and labour
the most expensive cities, shortages in the construction
which have become congested industry. This could transform the
and unaffordable for large groups residential sector in particular,
of the society. and offer a solution to housing
SMART CITIES, BUILDINGS AND INVESTORS shortages in major cities.
Technology and automation are pandemic, automated building
helping developed cities overall to controls that factor in temperature,
become more efficient, sustainable air quality, weather conditions and
and safe. The use of sensors allows occupancy will also be used widely.
for better management of traffic, These technologies help manage
energy and waste at all levels. And building systems, optimise energy
data collected from communities’ and space usage and improve user
electronic infrastructure is used to experience and wellbeing.
enhance efficiency and adaptability
in the way people use space. Big data will not only be a tool for
Citizens have become the sources the efficient design and operation
of big data via their mobile devices, of smart cities and buildings, it can
and city managers are applying also become a facilitator of more
big data analysis to monitor and informed decisions by investors
anticipate urban phenomena. and developers. By measuring
and analysing the impact of
At the building level, the adoption market conditions on building
of smart technologies is likely to performance, they can create
pick up strongly as a means to algorithms to anticipate future
ensure that buildings help prevent trends and opportunities.
contagion in the future. But post-OUTLOOK 2021
32 33
savillsim.com
Location will remain important as people become more
selective with regards to the neighbourhoods and the cities
FIGURE 14: WORKING AGE (15-64)
they choose to live in. People will prefer to live in mixed-use, POPULATION GROWTH (%) 2020-30
THE AUTOMATION EFFECT walkable and cyclable communities in proximity to amenities,
cultural attractions and green spaces, with access to quality Stockholm
Luxembourg
The big question about technology About 14% of the global workforce, and affordable housing as well as jobs. Cities – which offer a Malmo
Copenhagen
is the impact that it will have on or circa 375 million workers, will high quality of life, ensure their citizens’ safety, wellbeing and Oslo
Inner London
employment and the demand for probably need to build new skills are more resilient to external shocks – will attract both highly Genève
Zürich
workspace. Artificial intelligence is and redefine their career paths by skilled people and businesses. They will remain the main hubs
Gothenburg
Brussels
replacing repetitive and predictive 2030 as a result of these trends.19 of innovation and growth. The Savills IM Dynamic Cities Index
Toulouse
Málaga
white-collar jobs, while automation At the same time, aggregate helps to identify the factors that make a city attractive to
Prague
Edinburgh
Nantes
and robotics have implications machines will add jobs to the talent, resilient to disruptive technology and a leader in the Bordeaux
Bergen
more so for blue-collar jobs. Higher economy. There are already new knowledge economy.20 Ljubljana
Dublin
business efficiency could lead to industries emerging from the Helsinki
Belfast
reduced demand for office, retail technology sector that are creating Working-age populations across European cities are set to Bristol
Vienna
and warehousing/factory space. new specialisations, such as life increase by an average of 1.5% over the next 10 years, Oxford Manchester
The Hague
However, demand for higher-skilled sciences, e-commerce and gaming. Economics statistics suggest, with the strongest growth in Tallinn
Birmingham
workers is likely to remain strong, as Besides, the expected rise in Stockholm (14.7%), Copenhagen (9.9%), Oslo (9.3%) and
Leipzig
Amsterdam
robots will lack creativity and social productivity can lead to economic London (9.2%) during this period (figure 14).
Lyon
Tampere
intelligence. Therefore, automation growth, further investment and Nottingham
Aarhus
Munich
is likely to pose a bigger threat to rises in employment. In this new era of competition between cities, national and local Madrid
Budapest
income equality than to work itself, governments need to invest in smart technologies to become Bratislava
Sofia
as the balance of power shifts in more adaptable and resilient. Technology will shape the ‘new Utrecht
Glasgow
favour of educated workers.18 normal’, facilitating the creation of smarter, more sustainable Berlin
Sevilla
and more liveable buildings and cities. Hamburg
Cardiff
Sheffield
Barcelona
Dresden
Frankfurt
Graz
Antwerp
Bologna
THE IMPACT OF THE PANDEMIC FIGURE 13: PLEASE SELECT WHICH LOCATION YOU THINK Rome
Paris
CAN BEST FACILITATE THE FOLLOWING FACTORS (%) Warsaw
Marseille
It is widely accepted that the location. ‘Location, location, location’ Brno
0 20 40 60 80 100 Leeds
COVID-19 crisis has and will further has always been the key factor Personal
Groot-Rijnmond
Stuttgart
intensify the use of technology, determining the attractiveness and growth Liverpool
Lille
bringing forwards some of the value of a building. Will it remain Work/life
Company office Bremen
Krakow
trends and the changes that were relevant in the new post-pandemic balance At home Nice
Lisbon
Both
already underway. This raises more normal? The short answer is, ‘yes’. Sense of belonging/
Milano
Strasbourg
pride in company València
intense questions about the future Nuremburg
Grad Zagreb
of buildings and cities. Working from Until a vaccine is found, social Zaragoza
Physical health Bonn
home, shopping from home, eating distancing and intensive hygienic Cologne
Forence
from home and learning from home protocols will reduce personal Metz
Mental health Düsseldorf
became increasingly routine during contact to a certain extent. In the Bucharest
Bilbao
the lockdown, generating concerns short term, technology will help Wroclaw
Quality family time Torino
that people will not go back to compensate for the loss of direct Thessaloniki
Hannover
densely occupied buildings and cities. human interaction through virtual Ostrava
Gdansk
A daily routine
communication. In the medium to Palermo
Poznan
Napoli
The difficulty is that cities have long –term, however, collaboration, Time spent
Genova
commuting/
Plovdiv
always been enablers of creativity, growth, the generation of ideas traveling Essen
Vilniaus
innovation and economic activity, with and the development of talent Cost of commuting/ Porto
traveling Dortmund
buildings driving human interaction. will continue to require personal Lódz
Athens
During the pandemic, technology interaction in physical space. Riga
Source: KKS Savills Office FiT survey
allowed us to perform our activities Buildings will remain relevant and will -20 -10 0 10 20
solely, remotely and independent of adapt to change (figure 13).
Source: Oxford Economics
18
Oxford Economics
19
McKinsey Global Institute 20
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