It is very challenging to make predictions on a 12-month basis, especially during turbulent times and following all the unexpected events that have taken place in our sector. In addition to this, the impacts during the last 24 months have been quite unpredictable as well. I say this because even after a very strong initial shock when the pandemic started, investment in the real estate sector has responded much better than what was expected for most asset classes.
We were expecting a big impact and even a crisis; the opportunistic funds were ready to acquire mainly retail and hotels, but the increase in the yields didn’t really end up happening and we have seen surprising transactions in asset classes such as offices, retail, and housing. It seems that covid did not really have an impact on our sector, we are acquiring core plus assets at core yields, how can this be? Because money doesn’t have many places to go to.
The current scenario seems just like in February 2020 when we were starting discussions about the end of the cycle, but we still have more variables to consider, inflation, interest rates…nevertheless we continue to see transactions at very low yields, and even retail assets were one of the most impacted asset classes during the pandemic, are now generating investor appetite.
In my opinion, we will see large transactions during the next 12 months, in some asset classes prices will probably adjust but we need to consider that there is cash available waiting to be allocated and real estate has proven to be very resilient. Inflation and the increase in the cost of materials could have an impact on the pipeline in the medium term, and this could benefit the existing stock. The rise in interest rates can also have an impact of course, but real estate investors could even see a benefit on money going into investments that are not necessarily related to real estate.