Is the real estate market facing really tough times? And can some segments of it resist?
Prague, 20th of March 2023
The only segment of the real estate market that managed to withstand the combination of higher interest rates, inflation, and high energy prices last year, was industrial real estate.
"At the same time, to assume this segment is immune would be naive. Increased construction cost, yield shifts due to inflaction-driven rental rates and long-term high land prices brings significant challenges to underwriting and risk mitigation. Tenants in dire need of manufacturing or warehouse space are confronted with the market reality of higher rents. However, as this is an essential part of their business, they are trying to find savings elsewhere, for now" explains ARETE co-founder Robert Ides in a text for Wealth Magazín.
The low vacancy rates within this segment, record construction volume, and ongoing demand, have so far made logistics and light construction assets the most resilient within all RE asset class allocations.