BlackRock’s picks as real estate resets

Asset management giant BlackRock has singled out the UK real estate assets best placed to weather the current economic storm and deliver higher returns, but has warned that the country is at the forefront of falling values in Europe. In its annual outlook, BlackRock Alternatives said Europe’s “price-discovery phase” is seeing values fall, “led by relatively faster adjustments in the UK”. “Real estate is in a state of adjustment, as the drivers of tenant demand shift markedly and investors adjust their portfolio allocations,” the company said. “Occupancy levels across sectors are still high – something that could change as we get deeper into the economic cycle. And valid questions persist about how profoundly the rise in interest rates will disrupt property prices, especially if occupancy rates drop.” Pointing to the UK asset classes with the highest expected returns, the team highlighted London offices as having the likelihood of higher volatility, while student housing stood out for lower volatility and logistics between the two. UK retail was seen as having lower relative returns against higher market volatility. On private markets more broadly, BlackRock said: “The environment is complex and uncertain. Many developed nations are bracing for the possibility of recession. And climate change is both an imminent threat and an ongoing systemic challenge, as it shifts from the abstract to global temperature records and extreme weather changes. “But we see short-term uncertainty as an opportunity to continue investing in long-term megatrends, such as the net zero transition – investors will play a pivotal role in redirecting capital flows to finance the transition to a low carbon economy. We also see accelerated global technology adoption, growth in healthcare, and demographic shifts driven by changing lifestyles and preferences.” To send feedback, e-mail tim.burke@eg.co.uk or tweet @_tim_burke or @EGPropertyNews Image © Monkey Business Images/REX/Shutterstock