European real estate is a better way of capitalising on the reopening trade than the UK and US markets, according to Cohen & Steers senior portfolio manager Rogier Quirijns.
In the latest Portfolio Adviser video, Quirijns says he is less worried about the impact of higher inflation and interest rates on the European market than other areas, given the region’s lower growth and older demographic.
Quirijns notes the German residential sector, in particular, as defensive because tenants are often protected and rents are 30-50% below market levels, whereas the US real estate market tends to be more cyclical.
But even in Europe investors should remain wary of inflation and own sectors that can “grow out of inflation”, namely logistics, self-storage and healthcare, he adds.
But not all sectors offer inflation protection, with Quirijns saying: “You have to be cautious on certain retail sectors given rental levels.”
He says there are opportunities in retail, but they are few and far between. UK retail has been under severe pressure, with peak to trough valuation declines of around 50% and rental declines of 15-20%.
“I’m still cautious on the UK,” he says.
Finally, Quirijns touches on how certain real estate sectors are likely to perform relative to equity and fixed income markets, and why listed real estate is a better way to access property than open-ended structures.
See the above video for more.
By Sebastian Cheek, 10 May 21