The Great Re-opening Gains Momentum

The pandemic gave us time to reconsider our lives, our work, our relationships with families, friends, neighbors, and co-workers. It also fundamentally changed how we interact with technology and with our surroundings - in both the natural and built environments. For real estate investors, the pandemic rocked the foundation of the asset class. Yet, as our Mid-Year Update reveals, real estate has generally survived intact, and many markets are thriving in novel ways. Finally, the pandemic raised awareness for the possibilities for creating societal benefits through investment in low-carbon assets and in healthy, diverse communities.

Inflationary Pressure is Building

Real estate’s reputation for inflation protection will be tested in the months to come.  Several different types of inflation have already climbed into view:  Asset price inflation came first, followed by a spike in building material and energy costs. Next in line are labour and housing costs, and a broad range of consumer and producer prices that are all experiencing inflationary pressures in 2021.  At this stage in the re-opening of economies, inflation is still a good news story as a wide range of markets are responding to surging demand. The risks and opportunities associated with inflation are more subtle, as we describe in our June macro indicators deck.

Taxing Times Call For Taxing Measures

Taxation is typically a national or local issue, not a global one. However, the runaway success of technology companies and, in recent years, online retailers has elevated the topic to the international arena. The pandemic has increased tech companies’ market-leading positions, as locked-down households and businesses availed themselves of on-line products and services.  Many of these companies have a vast store of highly scalable intellectual capital, which can be “relocated” to whichever jurisdiction taxes it the least.  Or to put it another way, when most of a business lives in “the cloud” how do you tax it?

Opening Days

Narrator: Richard Kleinman, Head of Americas Research

The April edition of the Macro deck includes more optimistic signs than many of our previous statistical summaries of the past year. Perhaps this sense of optimism is in part driven by the fact many of the contributors to this Macro deck live in Chicago, where flowers are emerging after a rough winter and vaccinations will reportedly soon be available to everyone later this month. Whatever the exact factors may be, the building optimism about the expected re-opening later this summer is palpable and exhilarating.

Learning from Asia Pacific

Narrated by: Elysia Tse, Head of Research & Strategy (Asia Pacific) and Dennis Wong, Senior Strategist (Asia Pacific) 

Year of the Ox, Year of the Vax

Narrated by: Dominic Silman, Data Strategist and Brian Klinksiek, Head of European Research and Global Portfolio Strategies

February 12th marks the beginning of the Year of the Ox in the Lunar Calendar. In Chinese culture, Oxen are known for diligence, dependability, and determination. These are traits we will all need to rely on in the coming months while vaccine deployment proceeds at an ox-like pace. As we enter February, the depths of winter in the northern hemisphere, the pandemic shadow is once again darkening much of Europe and North America, and a weary populace may be forgiven a dream of spring.

In economics, dreams like this are referred to as “rational expectations” since current views of future conditions underpin human behaviour in markets and society at large. Rational expectations theory plays an important role in understanding many macro-economic situations. How might this approach apply to the pandemic and epidemiological data? Although we are not experts in virology, we would like to share our analysis of pandemic data that points toward connections to economies and property markets.

LaSalle Research - Narrators: Jacques Gordon, Global Head of Research & Strategy and Dan Mahoney, Managing Director &Investment Strategist

Our January Macro Indicators deck provides a summary of relative real estate performance in 2020 and an update on the pandemic, vaccine, and financial market indicators likely to drive real estate demand and pricing in 2021. The tug of war between long- and short-term drivers is itself driven by expectations for permanent vs. temporary pandemic impacts. These expectations will drive movements in the yields, prices, and indices we track each month. These macro themes are also the focus of the 2021 edition of the Investment Strategy Annual (ISA).

We highlight five key ISA themes for real estate investment in this Macro Indicators deck:

ISA 2021

The macroeconomic, political, and social outlook that sets the stage for investment plans and strong performance are the focus of the Investment Strategy Annual. The pandemic and the ensuing global recession raise the importance and difficulty of these tasks. Even as vaccine distribution gets underway, it will be many months before inoculations are readily available to the general public and economies are restored to their prior strength. During this COVID-19 end game, our advice to investors is to focus on these five themes:

1. Expect the dispersion of returns to continue

2. Invest in the rise of alternatives

3. Anticipate changing mobility and density preferences

4. Differentiate and separate permanent changes from temporary shifts

5. Balance three styles: growth, income, and dislocation

Jacques Gordon

LaSalle Research - Narrators: Brian Klinksiek, Head of European Research and Global Portfolio Strategies and Simon Marx, Head of UK Research & Strategy

LaSalle Research - Narrator: Jacques Gordon, Global Head of Research and Strategy