The property asset classes still struggling from the pandemic

Shopping centres are struggling the most in terms of capital growth in the UK, falling by -0.9% in May 2021 as well as by 21.5% in the past 12 months, the MSCI/IPD UK Monthly Property Index has revealed.

Leisure facilities have also seen their growth fall by -0.1%, as well as by -10.2% in the past year.

Offices outside of London are also struggling, falling in value by -0.8% in May as well as by -5.9% year-on-year.

Industry is returning

The top performer is industrial property, signalling that manufacturing is bouncing back.

In London industrial property has seen capital appreciation of 1.8% in a single month, as well as by 19.4% annually.

Outside of the city industrial property has also risen in value by 1.8% in May, as well as by 11.3% annually.

Distribution warehouses are also faring well, rising in value by 2.3% on a monthly basis as well as 15.6% annually.

Technology is key

Gregory Dewerpe, founder and chief executive of Europe’s proptech venture capitalist A/O PropTech, said there was a link between using cutting-edge technology and capital appreciation.

He said: “While the latest valuation data from MSCI for May shows modest aggregate increases of 0.6% for property as a whole, the figures are far more revealing when you look past the headlines.

“Assets that have typically been slow to update their models and/or incorporate technology, such as shopping centres, are showing negative capital growth of -0.9%.

“On the other hand, assets which are associated to the new normal and are typically more prone to technology integration, such as distribution warehouses – whose large, complex operations necessitate close engagement with cutting-edge technology – are showing strong growth of 2.3%, the highest of any sector.

“It’s a tale of two worlds and real estate is becoming a far more granular and differentiated asset class where technology will play an integral role on whether an asset becomes obsolete or not.”

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