Research Blast - Top 10 real estate questions for 2019

This time last year, our Research Blast sought to answer the forward-looking real estate questions as we saw them. Overall, the trends have been in line with our advice to clients, despite our prudence in some areas. Our assertion that 2018 would be a year of stability was correct: yield premia narrowed as expected, offset by continued rental growth and new capital entering the sector. As we foresaw, it was not yet the turning point for yields. That said we saw limited room for further yield compression, so we clearly underestimated the logistics sector. We were optimistic: we forecast "exceptional rental growth", but falling yields drove even better returns than we expected.

Our call for investment volumes "slightly ahead of the long-term average" was correct, as was the tapering of activity in the US and the levels of competition in continental Europe. Speaking of the US, supply and rent dynamics have evolved in line with our expectations, but our ~6% total return call was too conservative. The culprit? You guessed it: logistics. Similarly, we forecast a "meaningful deterioration" in Japanese returns and this has not materialized. Tenant demand has been very strong amidst continued central bank stimulus. In Europe, we were right about the sustained lack of supply and its influence on, in particular, office rents. Our view on the increasing importance of serviced office providers has also rung true. Finally, we said that "retail's evolution should accelerate" and this has certainly been proven, with valuations under major pressure in North America and parts of Europe as retailers become more proactive in responding to changing consumer preferences.