COVID Bond Bull Market: The Next Phase Begins
In its 3Q 2021 outlook, PGIM Fixed Income shares their views on the current economic environment and outlook for fixed income markets.
Real Estate Rebuilds Demand And Rebounds
Aug 19, 2021
PGIM Real Estate discusses wide range of opportunities for real estate investors from improving sentiment and rebounding demand.
2021 is shaping up to be a significantly better year for the global economy and real estate markets. Financial and real estate investment markets have avoided distress, and firmer growth is expected in the second half of 2021 and beyond. Employment is expected to recover, and an ongoing low-supply environment supports occupancy and rents. Recovering occupier markets create the potential for revenue generation and value appreciation. Evidence from past cycles, and ongoing real estate demand, point to potential overshooting, which would provide growth opportunities in the short term.
2021 Global Property Sector Returns
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Factors Shaping Near-Term Outlook
1. Worst of the crisis has passed: Areas that have not yet corrected are now unlikely to. We’re seeing an upward trend in global economic and real estate market activity.
2. Policy commitment remains significant: Extensive policy support is set to remain in place for some time, boosting real estate values by increasing cash flow predictability and keeping interest rates low.
3. Easing restrictions boosts demand: As workplaces and service-oriented industries reopen more fully in the back half of 2021, occupier sentiment is expected to return quickly, supporting a rebound in real estate space demand.
4. Fast rebound brings opportunities: Rapid growth, even though from a low base, is positive for driving opportunities. Sentiment can improve quickly, and businesses can move into expansion mode, thereby raising demand for real estate space.
5. Sector divergence is unprecedented: Unusually, a full range of cyclical opportunities are in play concurrently, with some areas delivering strong growth and attracting capital, while others face severe occupier stress.
Today’s real estate investment opportunities span a wide range of categories.
Crisis Brings Opportunities
Opportunities include the potential to capitalize on favorable occupier momentum linked to changes in real estate use, investment in assets that require some short-term repositioning, and value that can be found in parts of the market that have undergone a long-term correction.
Rising Demand Areas
INDUSTRIAL PROPERTIES
Increased online shopping requires supply chain expansion and is increasing demand for cold storage.
NON-TRADITIONAL SECTORS
Property types like senior living and self-storage are attractive because of cash flow resilience, low capex, and diversification.
URBAN APARTMENTS, OFFICES, HOTELS
Short-term disruptions and pandemic-led corrections in values of urban apartments, offices, and hotels have created attractive entry points.
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For Professional Investors only. All investments involve risk, including the possible loss of capital.
Past performance is no guarantee of future results. The views expressed herein are those of PGIM Real Estate investment professionals as of 28 July 2021 and may not be reflective of their current opinions and are subject to change without notice. Neither the information contained herein nor any opinion expressed shall be construed to constitute investment advice or an offer to sell or a solicitation to buy any securities mentioned herein. Any projections or forecasts presented herein are subject to change. This commentary does not purport to provide any legal, tax, or accounting advice. Certain information in this commentary has been obtained from sources believed to be reliable as of the date presented; however, we cannot guarantee the accuracy of such information, assure its completeness, or warrant such information will not be changed. The information contained herein is current as of the date of issuance (or such earlier date as referenced herein) and is subject to change without notice.
References to specific securities and their issuers are for illustrative purposes only and are not intended and should not be interpreted as recommendations to purchase or sell such securities. The securities referenced may or may not be held in the portfolio at the time of publication and, if such securities are held, no representation is being made that such securities will continue to be held.
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