EMEA Capital Advisors Four Quadrants - Keeping Calm And Carrying On, April 2017
- Defensive income streams have outperformed more volatile or uncertain markets and value-add strategies since the beginning of 2016
- In the UK, defensive strategies have outperformed REITs with value-add exposure or significant London office holdings
- The depreciation of Sterling since the Brexit vote has contributed to the significant underperformance of UK real estate stocks in euro terms
- Institutional investors have increased their focus on core income-producing strategies.
- Fundraising has maintained a good momentum in the second half of the year although fund closings are rare in the European value add space.
- On the UK secondary market for fund interests, both net asset values, and pricing relative to NAV have fallen after the Brexit vote.
- Against expectations, gilt yields have risen in response to the uncertain UK economic outlook
- Strong bond issuance during the third quarter has led to REITs taking advantage of lower rates on offer
- There has been some new CMBS issuance but this market still faces limited investor appetite
- Traditional lenders have sustained appetite for loans on prime assets and pricing is still competitive on the whole
- Development debt is still largely available but lenders are increasingly scrutinising the assumptions in borrowers’ business plans
- In the UK, residential and private rented sector finance is still popular from a lending perspective, but lenders are analysing and stress-testing the assumptions on high end schemes