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What does Biden victory in U.S. election mean for commercial real estate in EMEA?

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What does Biden victory in U.S. election mean for commercial real estate in EMEA?

  • Key implications for real estate will be International Trade, Corporate Investment and Climate Change
  • An anticipated rebound in economic growth in 2021 likely to be followed by a recovery of property market fundamentals to varying degrees across asset classes, with industrial proving to be the strongest asset class
  • Biden victory will see closer cooperation between Europe and USA which will boost investor confidence

Now that the US Election has been decided in favour of Joe Biden and the Democratic Party, Damian Harrington, Colliers’ Head of EMEA Research comments on the implications for global commercial property in an EMEA context:

“The geopolitical diversity of the EMEA region means that there are multiple economic and business permutations to consider in light of a new first term for President Biden and the Democratic party. There is a strong likelihood that the EU and national EEA (European Economic Area) governments will cooperate more openly with the United States under President Biden. Outside of the EEA, in Middle East, Africa, Russia and Turkey ongoing relationships will be more mixed.”

Three key implications will impact economies and commercial real estate in the EMEA region, according to Harrington:

 

1. International Trade | Reduced tariffs will support European import and export business, supporting and stabilising demand for industrial real estate. Biden’s camp has made it clear that it would take concrete steps to end what they call Trump’s ‘artificial trade war’ with the EU while working to address imbalances in trade between the partners. Reparation of NATO and alliance relationships should take much short-term economic and trade uncertainty off the agenda, but this will not change the need for Europe to become more independent and absorb the cost of its own security. This will come in the form of higher taxes over the mid-term, placing a drag on economic output, but will enable the European region to develop trade partnerships both West and East. Divisions over Iran should become less stark under Biden, negating the pressure the UK may have faced to split from European allies or risk tougher US sanctions. On the flipside, a future US - UK trade deal hangs in the balance, dependent upon the process and result of the imminent UK – EU trade deal.

2. Corporate Investment | European investment levels will be impacted by the extent to which Biden gets to enact regulatory and tax changes. If Biden is able to enact change, a larger ($2 billion) fiscal stimulus will likely counteract a higher taxation and regulatory burden, particularly for the U.S. consumer, limiting the impact on European export demand. However, tax changes could result in weaker US earnings short-term, particularly for US tech stock. Given the prevalence of the US tech sector in European office markets, especially the fabled “FAMANG” group (Facebook, Amazon, Microsoft, Apple, Netflix, Google), lower US FDI into EMEA could transpire, reducing European office demand. Given that the tech sector accounts for 15% of office-based employees and 18% of the office-based economy in European cities, this is one to watch. That said, European corporates should benefit from a stronger bounce back in earnings than their US peers in 2021, providing the opportunity to expand their corporate footprints, particularly in areas such as renewable energy.

3. Climate Change | Improved energy efficiency has major implications for real estate use, flexibility/adaptability and location and particularly for construction, project and asset management. This is being amplified by the need for cities to come to terms with how to operate in a new, post-COVID ‘normal’. A Biden victory not only supports the global climate change agenda, but also accelerates the growth of the burgeoning renewable energy sector, which has been a key component of FDI activity across EMEA in recent years. Renewable energy is one of the key pillars of the new, long-term E.U. 2027 budget to generate an extra 500 GW of renewable power, alongside 3 million new hybrid vehicle charging points and 1.000 hydrogen stations by 2030. Legislation is already coming into play in the Netherlands, with the UK to follow, restricting commercial leasing to assets that meet high energy efficiency standards. Given their high dependence on power, Data Centre assets are likely to come under scrutiny as to their long-term Environmental, Social, and Corporate Governance (ESG) credentials.


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What does Biden victory in U.S. election mean for commercial real estate in EMEA?

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