2021 Outlook

We look forward to a year full of achievements and would like to share our outlook for 2021 with you:

Political and economic risks

In spite of the recent positive news brought about by the approval of several COVID-19 vaccine candidates and the conclusion of a trade deal between the EU and the UK, there are still many political and economic risks that may afflict GDP growth in 2021. While several COVID-19 vaccine candidates have been approved, it is still not certain how quickly countries may be able to deploy them to ensure a return to normal. TCP expects this to occur no earlier than in the second half of 2021, meaning at least another six months of reduced economic activity. Additionally, it remains to be seen whether and for how long governments can and may be willing to support the sectors affected by the lockdowns, considering the surge in debt levels needed to accommodate the increase in fiscal spending in 2020. A premature withdrawal of government measures may lead to a rise in insolvencies in sectors affected by COVID-19, that may negatively affect global economic growth. 

Central Bank Policy

The economic downturn that ensued the national lockdowns to limit the spread of COVID-19, has forced the ECB to increase its accommodative stance to curb the potential impacts on the real economy. Consequently, the money supply in the euro area has risen sharply, but so far inflation has remained subdued as economic activity has been weak. At the same time saving rates have spiked significantly, with households not being able to spend as usual. The full deployment of COVID-19 vaccines expected in the second half of 2021, may consequently lead to a significant increase in inflation expectations once economic activity can pick up again. If the event of an unexpected and sustained spike, the ECB may be forced to suddenly increase interest rates, which would have a negative impact on commercial real estate valuations.

Given the uncertainties lying ahead of us in 2021, TCP recommends an anticipated exit strategy for planned dispositions.