Investment rebounds as rates plumb new ground
Investment volumes were strong in Q3 2019 after a somewhat sluggish start to the year. Excluding the UK, European volumes were up 4% on the same quarter a year earlier (-4% down on the same period including the UK). Once again, office, logistics and alternatives saw resilient demand although retail investment was more subdued.
- Demand for super core European assets is still strong, as negative fixed income pricing drives investors towards net zero real estate yields.
- Investors continue to realign portfolios to reflect changing perceptions of sustainable growth.
- Platforms that can best deliver scale and investment opportunity while managing gross to net income are mostly keenly prized.
- Sentiment on UK balanced funds is improving, while demand for long income funds is as strong as ever.
- Diversified European funds and beds, meds and sheds remain highly popular.
- Larger strategic trades have taken up the slack from smaller tactical plays over the course of the year.
- Both CMBS and corporate debt issuance was subdued compared to the previous quarter.
- Those deals that did transact demonstrated resilient pricing.
- Hurdles to Sonia-linked CMBS still exist but we anticipate these will be overcome.
- Lenders have followed investors into alternative sectors (and away from retail).
- The benefits of negative interest rates are selectively but increasingly being passed onto borrowers.
- Fintech platforms continue to expand into the smaller ticket market vacated by banks, offering attractive returns to funding providers.