There are three reasons why the rental market hasn't produced stellar returns in 2017 despite the European jobs market showing strength, Cohen & Steers’ Rogier Quirijns has said.
Speaking to Citywire Selector, AA-rated Quirijns, who manages the Cohen & Steers European Real Estate Securities fund, addressed the question of whether or not higher employment figures across the region has helped to spur on growth in other sectors.
‘That’s a tough question for the real estate industry because consumer spending has been quite positive due to the economic growth, but generally speaking, this hasn’t led to increased retail rents in the sector and that’s due to a couple of reasons.'
Quirijns said the first of these is that the market is still recovering from a deep recession. 'Once the recovery started a lot of consumers have been spending more money on delevering themselves.
'Then they buy houses and then thirdly buying large items like cars or household goods.’
Quirijns said as long as the recovery continues, consumers will continue to spend money on other things.
‘The second reason for less retail interest is millennials and the trends they follow. Younger people want to spend their money on different things like restaurants, weekends away and holidays.
'Generally speaking, out of the money that people spend, fashion and retail spending has diminished or decreased over the last few years.’
Quirjins said: ‘Thirdly, the internet, of course there is a lot of spending through this medium.
'Although we are in a recovery and consumer spending is positive, only a small part will go to retail spending or retail assets – it’s still tough to see rental growth in the retail sector because of the rise in internet spending.'
Over the three years to the end of November 2017, the Cohen & Steers SICAV European Real Estate fund returned 39.74% in euro terms.
This compares with a 25.69% rise by its Citywire-assigned benchmark the FTSE EPRA/NAREIT Developed European TR, over the same time period.