Some Surprising Risk-Adjusted Bets for Investment in 2021

Logistics, residential and life sciences are the sectors to watch as the economy swings back, according to new global research from Cushman & Wakefield released this week. But while these sectors are the clear “pandemic winners,” Cushman experts also say office and retail are “interesting risk-adjusted bets” as we move into 2021.

Logistics will benefit from continued disruption to living, shopping, and working patterns coast-to-coast, and supply chain changes will also be demand drivers in some regions. But there’s a note of caution, however: “keep an eye on the construction side and pricing,” Cushman economists write in the report. “It is rarely a good sign when the industry begins labeling sectors ‘bulletproof.’” 

There are also near-term headwinds afoot for multifamily as back rent comes due and eviction moratoria lift. And while global markets may see a variety of impacts on valuations depending on the type and amount of tenant concessions they make, “housing cannot go virtual,” Cushman economists explain. “Many secondary, non-global gateway markets have maintained positive metrics through the crisis, showing signs of resilience in the sector overall. Demographics also indicate long-term strength in this sector and often an undersupply of the right product.”

Demand for office product will oscillate as WFH drags on, but Cushman forecasts modern flexible space will be a key solution driver in 2022. “Few companies are going 100% remote,” the report states. “Office will thrive again.”  And that’s certainly welcome news for urban landlords in the asset class, many of whom are facing up to a 20% decline in demand this year, according to some estimates.

And on the retail front, some good news: 2022 will be a big year, Cushman predicts. Strong anchor tenants in destination and convenience locations will be key for the revolution, and if vaccination programs move quickly, investors can expect repricing to create opportunities this year.  

Similarly, the troubled hospitality sector may present opportunities this year, especially as automation, operational efficiencies and flexible business models emerge and improve.