European real estate funds offer a number of advantages - notably, a wide variety of attractive properties over a large region

Swiss Life Asset Managers specialises in identifying the best real estate in prosperous European city locations and consolidating it into funds with innovative and tailored opportunity-risk profiles. To precisely meet investors’ needs, these funds also include properties used for commercial and industrial purposes.

Successfully combining industrial and logistics real estate
Logistics and other commercial properties are the main beneficiaries of the current pandemic situation. By contrast, other types of real estate, such as retail and hospitality properties, are suffering from the negative economic effects of the crisis.

  • Industrial real estate includes a variety of commercial uses, with many SMEs among the tenants. Types of use include warehousing, manufacturing, office, research and service space.
  • Logistics properties are generally large-scale properties with good transport access in European metropolitan regions. They are used for storage, order-picking and distribution.

Last spring’s lockdown highlighted the growth potential and importance of e-commerce in particular. Sales are expected to remain at a high level even after the COVID-19 pandemic. In addition, logistics and light industrial real estate usually offer stable returns for investors, with industrial real estate in particular characterised by an above-average granularity of rental income.

Stable and profitable investments in good locations in metropolitan regions
An expected further opening of the yield gap between properties with strong and weak locational qualities as well as residential and commercial properties brings new opportunities for all investors. The individually tailored risk-bearing capacity of a fund is particularly important for investors.

With interest rates currently very low, attractive returns can be expected on office, retail and residential property centrally located in major cities and regional centres of Europe’s metropolitan regions. Moreover, such investments have little correlation with other asset classes. That is why European real estate investments are a good way to diversify the portfolios of Swiss investors.

With interest rates currently very low, attractive returns can be expected on office, light industrial and residential property well located in major cities and regional centres of Europe’s metropolitan regions.

One advantage of residential property is that the impact of the pandemic on rental housing markets has been less pronounced than in other real estate sectors. Although residential property is not entirely decoupled from economic performance, it has a stabilising effect on portfolios diversified by type of use. You can avoid the price war on the market for commercial properties if you are familiar with tenants’ needs.

Continuity and growth in the German real estate market
The German economy with its broad base in sectoral and regional terms and its numerous real estate submarkets contributes to an attractive risk/return profile for German real estate. In addition, demographic change is making the German residential investment market, one of the largest of its kind in Europe, particularly attractive.

Berlin skyline panorama with TV tower and Spree river at sunset, Germany

Since the number of households in Germany is growing faster than the population, there is an increasing need for smaller dwellings. Moreover, immigration to the cities is now spreading into the surrounding areas. There is insufficient construction activity to meet demand, especially in large cities and metropolitan areas. This is also due to a lack of planning and construction capacity. At the same time, there is no sight of any significant weakening in the fundamental drivers of the residential market.

Strong demand for space and sluggish construction activity have also led to low vacancies in the office market in recent years. Even taking into account reduced tenant demand due to the economic situation and the imminent completion of new buildings, vacancies are likely to increase only slightly in the future.

First published by Investrends, 15 March 2021
Author: Mario Holenstein, Head of Real Estate Portfolio Management (CH) European Properties, Swiss Life Asset Managers

Further information on our solutions and services here

More interesting articles

Team of traders working with forex (foreign exchange) trading charts and graphs on computer screen, concept about stock market investment, finance, selling and buying

Investments

Finding the right balance in global corporate bonds

The markets in the midst of a pandemic are also challenging for our fixed income colleagues. In our new video format "Fixed Income Insights" Daniel Rempfler, Head of Fixed Income and Alois Seeholzer, portfolio manager for corporate bonds, provide insights into their investment strategies and explain what investors should pay attention to.

Read more
View on the financial district with Main river and park during the sunset in Frankfurt city, Germany

Sustainability

ESG criteria for sustainable, secure investments

ESG criteria, i.e. information on the environment, society and governance, provide valuable additional information, particularly for investments in emerging markets. This avoids risks and generates higher returns. At the same time, ESG investments provide emerging countries with incentives for more sustainable development and thus contribute to greater prosperity over the long term.

Read more
workers at work. container man in yard

Real Assets

Are investments in logistics and industry worthwhile?

The logistics sector is currently benefiting from long-term structural trends and makes low-risk investments possible. At the same time, industrial real estate offers increasingly attractive investment opportunities with a wide range of tenants. With a carefully selected combination of the two, long-term investors can benefit from secure and sustainable returns.

Read more