Trends for 2021Trendsfor2021

Signs are encouraging for economic activity going into 2021, but real estate demand will be held back in the first half of the year because of elevated uncertainty.

Unlike past cycles, supply growth was contained prior to the downturn and is set to remain subdued in 2021 and beyond.

Office vacancy is already rising and the prospect of a shift to increased remote working is set to weigh on rental growth prospects in the coming years.

Rental growth divergence is set to remain wide, driven by contrasting fortunes across geographies as well as between the logistics and retail sectors.

Transaction volume has fallen sharply and, while investors are keen to deploy capital, ongoing restrictions are set to hold back the recovery in deal activity.

The sharp drop in long-term interest rate expectations recorded in 2020 continue to provide support for yields at current levels, despite wider uncertainty.

Yields may fluctuate in the near term, but 2021 looks set to be the first year of a new cycle, where rental growth, rather than yield shift, determines value movement.

The share of debt capital raising continues to increase, supporting a gradual improvement in origination volume from a broader group of lenders in 2021.

Distress is set to be limited but value declines in parts of the market and ongoing regulatory constraints on banks imply a growing opportunity for nonbank lenders in 2021.