![]() But we expect multifamily-for-rent products to continue benefiting from favorable demographics. ![]() ![]() Longer term, a rise in rates may pressure single-family appreciation. Other strong performers include the residential housing sector. The industrial sector has been the big winner, with institutional demand at record highs supported by secular e-commerce tailwinds. We expect to see opportunities for properties that are being repurposed but only at much lower prices than the previous retail values. ![]() In our view, retail is arguably no longer a core portfolio asset. malls and a wave of core funds looking to reduce retail exposure. Adding further pressure is a wall of loan maturities coming due, including for U.S. Many tenants are not going to come back or, in the U.S., they will likely vacate when Paycheck Protection Program (PPP) loan funds run out. In fact, distress appears set to pick up in 2022. Retail landlords are suffering along with their tenants and we do not think rescue capital will be enough to save many of these struggling assets. In contrast, we believe the retail sector is a long-term loser. In the U.S., revenue per available room (RevPAR) has rebounded to roughly 75% of 2019 levels, portending recoveries in Europe as their quarantines are lifted. These assets have massive capital shortfalls, which we think are temporary. While the sector is improving dramatically in the U.S., pressures remain in Europe as lockdowns there extended longer. The hotel sector has been a short-term loser but should, in our view, recover gradually, albeit unevenly. Murray: I agree, it reshaped the market and created massive dispersion in performance between sectors – more than I’ve seen in my career – with the winners and losers largely sector specific. If they cannot find existing core property investments, they are ready to generate yield pickup by “producing” the core (e.g., finding high quality, long-term tenants for a building with little to no deferred maintenance and moderate debt to capitalization). Alongside these, the disruption has sent investors in the core and core-plus space looking for quality and stable yields, while seeking to benefit from pandemic-related dislocations. Another trend that has been accelerated is rapid technology adoption, including e-commerce and teleconferencing. Young people want to live in cities, close to jobs, education, and healthcare. Trausch: The disruption from the pandemic has accelerated secular forces such as urbanization. Volumes were off just 12% in multi-family this compares well to retail, down 42% office, down 36% and industrial/logistics, off 41%. Multi-family was the best-performing sector in terms of transaction volumes in the first quarter in the U.S. In Asia, the industrial sector, primarily logistics, performed best, with volumes rising 5% from last year and 22% from 2019. In Europe, the dollar amount of multi-family transactions jumped 66% in the first quarter of 2021 from the year before, with two of the first quarter’s biggest deals in residential properties. Multi-family properties, however, held up incredibly well in the U.S. Footnote This was not surprising, given the pandemic. ![]() and Europe, respectively, and 12% in Asia. Walters: Global transaction volumes fell 26% and 27% in the U.S. Q: Before diving into your views on the office sector, first give us a sense for global transaction volumes in the first quarter across various regions, and what asset types held up best. Footnote By combining forces, PIMCO and Allianz Real Estate can offer the broad spectrum of real estate investments, ranging from core, stable assets, to opportunistic investments. The partnership combined two organizations with complementary geographic focuses, products, and expertise into one of the largest real estate investors in the world, with $180 billion in assets managed across both public and private real estate. They discuss their market views, particularly within the office sector.Ībout PIMCO and Allianz Real Estate: PIMCO assumed oversight over Allianz Real Estate in 2020. What will this mean for investors? John Murray, PIMCO's global head of private commercial real estate, Francois Trausch, CEO and CIO of Allianz Real Estate, and Megan Walters, who leads global research at Allianz Real Estate, talk with Michael Chandra, who oversees PIMCO's U.S. The pandemic turbocharged e-commerce and work-from-home movements, reshaped the markets, and created winners and losers across commercial real estate sectors. ![]()
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