Global Real Estate Outlook (EN)

Uncertainty is the new normal

2020 will go down in history as the year of the pandemic; an epic shock for societies and economies. With shock, often comes a powerful emotional response, and how we process this is imperative. Acceptance of continued high uncertainty is necessary to move forward, warranting a diligent, risk-off approach in the near term.

United Kingdom

Which key trends can we expect to shape the market and how should we think about investment?

A look ahead

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The changing role of real estate

We need to question the role that real estate plays for its occupiers, in response to accelerated structural trends, including increased flexibility in working patterns. At the core, buildings which provide an experience over and above digital solutions, and which have a positive impact on both wellbeing and the environment, stand to thrive in the long-term.

Taking a proactive approach

Click to explore the outlook for regional markets.

People around the world are led by different cultural norms, which is reflected in key differences in their approach to real estate.

Regional trends

Asia Pacific

Real estate themes

Economic highlights

Strategic calls

Tread with caution

Longer term opportunities

Resilient

A diversified tenant pool, increased home working and the preference for inner-city living should continue to support outperformance in Japan’s multifamily sector.

Markets with large domestic populations and low availability of prime modern stock, including key Japanese and Australian cities, as well as Greater Seoul, will likely benefit from rising e-commerce.

Suburban shopping centres in dense neighbourhoods have benefited from increased footfall and will likely remain resilient. The low dependency on tourism, coupled with a higher offering of non-discretionary retail tenants, should provide a buffer against any external shocks.

High street retail areas that are largely dependent on tourist arrivals and the sale of discretionary goods, such as Tokyo’s Ginza district, Osaka’s Shinsaibashi, and Seoul’s Myeongdong, are likely to see rental corrections.

Mounting headwinds, including office decentralisation trends, uncertainties around the new national security law and COVID-19, weigh heavily on this submarket's outlook.

Forward funding or developing prime office and logistics schemes can provide access to critical technology or logistics hubs within cities with positive long-term fundamentals.

With the acceleration in obsolescence of secondary grade assets in the office and logistics sectors, investors seeking higher returns could capitalise on short-term pricing dislocations by repurposing these assets into prime, modern buildings with strong ESG characteristics.

Strategic calls

To meet the rising demand of e-commerce, logistics operators are likely to turn to technology, such as Automated Guided Vehicles and Radio Frequency Identification tagging, to manage goods, improve efficiency and reduce reliance on human labour. This will lead to increased ‘upgrading demand’ for prime modern logistics. Consequently, we expect more investors to respond by building modern logistics facilities with large, efficient floor plates, ramps for easy access, and good access to power. Lower-grade assets in land-abundant submarkets will likely face accelerated obsolescence risk.

Source: M&G Real Estate based on data from Google Community Mobility Report, Singapore. Information is subject to change and is not a guarantee of future results

M&G Real Estate based on data from PMA, September 2020. Information is subject to change and is not a guarantee of future results

*Source: CBRE Survey, June 2020. 69.8% of global respondents indicated that there will be some remote work policies for their company in future. Information is subject to change and is not a guarantee of future results

Times are changing

Caught in different market cycles

Suburban retail therapy

Flight to quality

The backdrop

Real estate themes

Source: Bloomberg consensus, September 2020. Information is subject to change and is not a guarantee of future results

Source: M&G Real Estate based on data from Google Community Mobility Report & Oxford University as of September 2020. * Stringency index takes into account 7 indicators including school and workplace closures, public event cancelations, restriction of social gatherings, stay-home requirements, public transportation closures and travel restrictions. A score of 100 would mean that a country has implemented all of these measures. Information is subject to change and is not a guarantee of future results

Developed economies lead the way

Adapting quickly

Economic highlights

Real estate themes

Economic highlights

Strategic calls

Tread with caution

Longer term opportunities

Resilient

The non-discretionary nature of grocery sales has been reinforced by the greater prevalence of home dining during the pandemic. Bond-like long income supermarket assets may benefit from yield tightening, given the falls seen in the bond markets.

Lockdown has provided a tremendous boost to online sales penetration, with consumer demand for speedy and reliable delivery accelerating the need to optimise supply chains. Undersupplied logistics markets in good proximity to end-consumers, such as London and South East, will be the biggest winners.

Tenant demand is set to remain resilient, particularly for Build To Rent accommodation with space for home working. Investors remain attracted to the sector’s positive long-term fundamentals.

Retail properties that are largely dependent on tourism and discretionary goods sales are likely to see the biggest impact in the near term. Secondary retail assets lacking ‘destination appeal’ face the biggest long-term challenge.

Occupiers are becoming more selective about the quality and location of their office space. Secondary assets with poor ESG credentials in non-core locations, or that cater to back-office functions, are more exposed to obsolescence.

Hotels are under financial pressure owing to a lack of income, prompting potential business failures. This could drive forced sales in the short- to medium-term, creating an opportunity to tap into longer term growth potential at opportunistic pricing.

Despite the occupational market being one of the hardest hit by lockdown, student numbers, particularly from overseas, are likely to continue to grow in the long-term. We expect Purpose Built Student Accommodation to continue to expand in market share.

Strategic calls

* Source: dbDIG Survey, Deutsche Bank Research, latest survey based on 800 respondents, September 2020. Information is subject to change and is not a guarantee of future results.

* Source: Resolution Foundation, Coronavirus survey, May 2020. Information is subject to change and is not a guarantee of future results.

Occupational demand will not escape economic fallout, but how deep is the rental downturn likely to be? That depends on the sector. For retail property, the cyclical challenge adds to structural change already reshaping the sector. Low vacancy and a general lack of supply insulates other property sectors like offices from the cyclical blow to demand. In our view, a deep downturn like the one seen in the early ‘90s is highly unlikely. Residential rents are living up to their reputation and proving more defensive, as they did during the Global Financial Crisis. Rates of rent collection have topped all other real estate during the pandemic and we expect the sector’s resilience to continue. Industrial rents will continue to be supported by tailwinds from e-commerce growth, albeit not completely immune from the economic downturn. Ultimately, investors need to reflect the likely lasting impacts of COVID-19 in their strategies.

Rental markets: winners and losers

Flight to core prevails

Safe as houses

Office and residential symbiosis

The backdrop

Real estate themes

Stimulus and intervention like the furlough scheme have steered the economy away from collapse. But support mechanisms are evolving and the level of support is being tapered, leading to potential business failures and job losses. The government’s pragmatic fiscal approach aims to mitigate short-term pain whilst rebalancing the economy towards more sustainable jobs and industries. Questions remain about the longer term implications of high fiscal spending: Could we see future inflation? Tax rises? Austerity? Or, like Japan, will the UK choose to accept a high debt-to-GDP ratio far into the future?

Government to the rescue, but for how long and at what cost?

1994

1996

1998

2000

2002

Public sector net debt as % of GDP

2004

2006

2008

2010

2012

2014

2016

2018

2020

120 100 80 60 40 20 0

Source: ONS, September 2020.

The economy is starting its recovery, in places, but has a way to go before lost output is regained. The trajectory will be closely tied to the tightening and relaxing of public restrictions. However, the government is increasingly focused on striking a balance between tackling the virus and limiting second and third order effects on people and the economy. Brexit is an added bump in the road, contributing more uncertainty. Greater economic stability moves closer with progress towards an effective medical solution for COVID-19, by means of an unprecedented global effort.

Source: ONS, October 2020, Google Community Mobility Report, October 2020 – monthly averages used (February = 15 - 29 February only; October = 1 – 9 October only). Information is subject to change and is not a guarantee of future results.

Feb 20

GDP

Mobility: retail and recreation

Mobility: transit stations

Mar 20

Apr 20

May 20

Jun 20

Jul 20

Aug 20

Sep 20

Oct 20

100 95 90 85 80 75 70

0 -15 -30 -45 -60 -75 -90

Monthly index of GDP (February 2020 = 100)

Mobility index (monthly average, % compared to pre-COVID-19 baseline)

Government rescue: how long and at what cost?

Striking a balance

Economic highlights

United Kingdom

Restrictions on mobility hamper economic activity

While investors grapple with economic upheaval and uncertainty, they will continue to seek safe haven investments. In our opinion, assets and portfolios with these sought after characteristics will reflect better performance for the foreseeable future. Prime assets at bargain prices will be far less likely to come by than during the Global Financial Crisis, given that this downturn is characterised by occupier issues as opposed to financial sector distress. Non-core assets with riskier characteristics, such as vacancy, weak covenant strength or poor ESG credentials, will command a high risk premium. Inevitably, any period of distress creates buying opportunities and the time to pursue elevated risk will come as the economy moves towards greater stabilisation.

The fact we can shop without going to a shop and work without going to an office, but always need somewhere to live, underscores the long-term resilience of the residential ‘Living’ sectors. The pandemic has provided stimulus for people to reflect on their living situations, prompting greater appreciation of community and accelerating certain housing decisions. The need for more housing at an affordable cost will continue to drive high demand for flexible living solutions, including Private Rented Sector accommodation. Young people are expected to be the group hardest hit economically by the pandemic* and will continue to face difficulty getting onto the housing ladder. Therefore schemes like Shared Ownership will continue to play an important role in providing an accessible route to home ownership.

The pandemic will pass, but flexible working will remain part of its legacy. An average of three days per week in the office is emerging as employees’ expected post COVID-19 preference.* Offices in employment hubs, such as central London and Manchester, best provide for networking, collaboration and social interaction – the antidote to home working. With flexible working set to remain ingrained in the working week, living space that enables productivity will be highly sought after.

Asia Pacific

Stringent measures put in place early on in the pandemic have been relatively effective in controlling the virus. While some restrictions remain in place, people have adapted quickly to the new normal. Mobility has increased by 20% since trough levels in April, now at 80% of pre COVID-19 levels. As mobility improves, pent-up demand will bolster the recovery in consumer spending.

APAC markets’ relative preparedness and success in handling the pandemic, coupled with governments’ robust fiscal and monetary support, positions the developed APAC economies for a softer decline, followed by a relatively faster recovery, than other global economies. With the easing of lockdown measures, consumer sentiment across APAC has started to improve which should help to reinvigorate aggregate demand. The extent of growth, however, will be dependent on whether the pandemic can be contained on a more global basis in order for exports and tourism to recover more quickly.

Cultural norms and home office constraints, within densely populated cities such Hong Kong, Tokyo, Seoul and Singapore, are leading many staff back to the office, which remains a relevant touchpoint for employees. The office also represents a conduit for client engagement, given that business relations are an intrinsic part of deal making, particularly in South Korea and Japan. Yet APAC office markets will not be undisrupted by structural change spurred by COVID-19, with ~70% of survey respondents* in favour of the option to work flexibly in the long term. This could alter demand patterns for office space, as businesses reassess their corporate real estate strategy. Increased demand for high quality assets that promote employees’ wellness and meet companies’ ethos is likely to drive greater bifurcation in rents over the longer term. However, internal analysis indicates that a one-day home working arrangement is unlikely to have a material impact on cities’ vacancy rates.

Most office markets entered the crisis from a position of strength, backed by healthy demand from technology and business services industries as well as a limited supply pipeline. Key Japanese cities began with robust leasing demand, tight vacancy rates and low new supply, contributing to the resilience in these markets. At the other end of the spectrum, Hong Kong, Sydney and Singapore entered the crisis from a weaker position, stemming from various cyclical factors including slowing demand, rising second-hand space, low rental affordability and high development completions. Rental growth in select Central Business District markets, including Sydney and Melbourne, could experience short-term downward pressure in the current risk-off environment.

Closing time? Hardly so for suburban retail centres, which have bucked the retail property trend throughout the crisis. With more people working from home, suburban retail has seen a rise of weekday shoppers. In-place travel restrictions have also helped, as residents remain bound to their local vicinities. Footfall has started to rebound and is now at approximately 70-80% of pre COVID-19 levels. Therefore, the sector is expected to remain defensive over the medium term, particularly in dense markets like Singapore.

Real estate themes

Economic highlights

Strategic calls

Tread with caution

Longer term opportunities

Resilient

A culture of 'presenteeism' in Germany has driven staff back into offices faster than elsewhere. What’s more, Berlin and Munich boast vacancy rates below 2%.

Already crowned as Europe’s most digital natives, COVID-19 has accelerated online consumption. Nordic capitals are also tipped as the fastest growing populations in Europe.

The largest Randstad cities, including Amsterdam, currently suffer from a shortage of 300,000 homes - a gap that is expected to continue rising. Rents in the ‘liberalised’ free market are only going one way.

Online sales are rising but distribution companies face ever decreasing profit margins. Europe’s manufacturers have also lagged China and the US in Artificial Intelligence and 5G adoption. Segments of the logistics market may have it tougher than others.

Liberal planning rules had driven more development, creating more volatility around rents and occupancy. COVID-19 has only added to these concerns.

Northern Europe was already more enamoured with online fashion than its Southern neighbours, pre-lockdown. Rental values could face a tough time in the years ahead, as consumers increasingly ‘vote with their fingers’.

Europe’s population is ageing. A lack of housing supply for young people in cities is made worse by limited options for its elderly. Providing apartments for seniors looking to retire more comfortably, would also help to free up space at the bottom of the chain.

Europe’s universities had welcomed millions of foreign students in recent years, enticed by English-taught degrees and cheap tuition. The 2021 prognosis is ‘down but not out’.

Strategic calls

The impact of COVID-19 has shifted the debate on the traditional work-life equilibrium. The decision to rent, expand living space, or move closer or further from work, has always been a product of individual social circumstance, whereby commute times often grow as renters move along the lifecycle and start families. We believe the pandemic has altered the tipping point of that decision, based around a more flexible approach to home working. Europe’s capitals will remain the anchor, but rental opportunities are likely to grow in well-connected commuter belts, which offer families and retirees a more balanced lifestyle at more affordable rents.

Germany has led Europe’s office return, sticking to its cultural stereotype of ‘presenteeism’, with 50-70% of staff now working less than two days per week from home*. Across Europe, the fatigue of working from home may drive many workers back into the office in the short term. Longer term, culture, age and industry will likely define the new equilibrium between home and office working. This balance can and does work for offices; Sweden and the Netherlands were already adept in flexible working pre COVID-19. Headline rents in Stockholm and Amsterdam haven’t been short on growth over the last three years either. For the office sector to survive and continue to thrive long term, it will need to adapt to modern ways of agile working.

Source: *Morgan Stanley survey, August 2020. **Eurostat, 2019. Information is subject to change and is not a guarantee of future results.

Source: PMA data, October 2020. Information is subject to change and is not a guarantee of future results.

Germany retained its crown as Europe’s safe haven market in 2020. Bidding wars on core assets saw pricing move in, with investment volumes holding up year-on-year. With the property yield spread on 10-year Bunds still a healthy 330bps+, real estate pricing looks likely to tighten further. Investors need only look east to markets like Japan, where the equivalent spread is less than 250bps, to see Germany’s potential.

Concrete gold

This time it’s different

Back to the office

A shift in the work-life equilibrium

The backdrop

Real estate themes

Job support schemes have so far kept a lid on unemployment rates. Germany and France have opted to extend their schemes by a further 24 months, helping to stabilise the jobs market and support incomes, longer term. Other governments may follow suit, but the cost implications are mounting. Budget deficits are set to rise to 8% plus at the Eurozone level – well above the peak, post Global Financial Crisis. Fiscally prudent countries like Germany and the Netherlands are better positioned to weather this spending spree than countries with weaker balance sheets, such as France, Italy and Spain.

Source: Trading Economics, September 2020. Information is subject to change and is not a guarantee of future results.

Europe’s economies are facing a difficult balancing act, between virus containment and the longer term economic costs of lockdown measures. Individual lockdown strategies are being tested. The Nordics have pursued their own path – lockdown ‘light’ or lockdown early – which is now paying dividends for growth prospects. While more economically sustainable, this strategy does not work for everyone. Population densities, the role of the service sector and culture all differ across Europe, meaning a different approach is needed. Further restrictions may well be implemented, but few have suggested reverting to the same level of stringency seen back in April. With businesses now more prepared to deal with government lockdowns, this should allow economies to continue operating at a higher capacity than seen before.

Source: Trading Economics (October 2020), Google Community Mobility Report (October 2020). *Stringency index takes into account 7 indicators including school and workplace closures, public event cancelations, restriction of social gatherings, stay-home requirements, public transportation closures and travel restrictions. A score of 100 would mean that a country has implemented all of these measures. Core Eurozone reflects Germany, France, Italy, Spain and the Netherlands. Information is subject to change and is not a guarantee of future results.

Keeping on top of the bills

Tough decisions lie ahead

Economic highlights

Europe

Source: BVI, August 2020. Information is subject to change and is not a guarantee of future results.

Income security

Prime location

High spec building

Core real estate offers sought after characteristics

City living

Experiences, buzz, networking

Suburbia

Education, quiet, more space

% of people working from home ‘sometimes’ in 2019**

Days in the office

Less

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Reimagining corporate real estate strategies – a hybrid model?

Fully remote workforce?

Hybrid of strategies?

Decentralised office?

Flexible spaces?

Hub and spoke model?

ESG requirements?

Europe

Brexit uncertainty has held back pricing – investors can take advantage of a higher property risk premium for UK property than is reflected by other markets.

London: City

Europe (ex UK)

The UK reflects a Brexit-fuelled pricing advantage

Q2 10

Q1 11

Q4 11

Q3 12

Q2 13

Prime office net initial yield (%)

Q1 14

Q4 14

Q3 15

Q2 16

Q1 17

Q4 17

Q3 18

Q2 19

Q1 20

6.0 5.5 5.0 4.5 4.0 3.5 3.0

Yield premium (real estate – gilts)

Yield premium (real estate – corporate bonds)

Attractive record-wide spread over bonds

2000

2002

2004

2006

2008

Yield gap (%)

2010

2012

2014

2016

2018

2020

7% 6% 5% 4% 3% 2% 1% 0% -1%

COVID-19 has seen bond yields plumb to new depths as investors seek safe haven assets. A record-wide spread has opened up relative to property yields, which will likely attract multi-asset class investors.

Nordics

Core Eurozone

The Nordics take a lighter approach

Jan 20

Mar 20

Apr 20

Jun 20

Aug 20

90 70 50 20 0

Government stringency index*

2017

2019

2021 (f)

Cost implications are mounting

2% 0 -2% -4% -6% -8% -10% -12% -14%

Government budgets (% of GDP)

France

Italy

Spain

Netherlands

Germany

Real assets provide an element of stability not seen in other asset classes and Germany remains the go-to market in a time of crisis. Rolling annual volumes fell to €78 billion in Q2 (just 3% down on Q1 but 7% up on Q4).

Q2 v Q1

Q2 v Q4

Demand for German real estate continued even at the height of lockdown

4% 2% 0 -2% -4% -6% -8% -10% -12%

Rolling annual investment volumes (q-o-q change)

Italy

Netherlands

Spain

France

Germany

5 days

0 days

1-2 days

3-4 days

Germany leads, will others follow?

Berlin Hamburg Stuttgart Barcelona Milan Paris Frankfurt Madrid Rome London

Current WFH days per week (% of workers)

25%

50%

75%

100%

German workers are going back to the office faster than elsewhere, with 50-70% now working < 2 days per week from home.

Monthly flows (LHS)

Rolling annual (RHS)

German open-ended fund flows still in the green

2005

2007

2009

2011

2013

2015

2017

2019

5 4 3 2 1 0 -1 -2 -3 -4 -5

15 10 5 0 -5 -10 -15

Monthly flows (€ Billion)

Rolling annual flows (€ Billion)

Source: PMA (October 2020); Alphawise Morgan Stanley Research Survey July-August 2020. Ranked by 0 days and 1-2 days WFH %

Paris

Munich

Amsterdam

Madrid

No supply shock this time around

1990

1992

1994

1996

1998

2000

2002

2004

2024 (f)

Office net additions (% of stock)

10 8 6 4 2 0 -2 -4

Introduction

Acceptance

Average APAC Stringency (Index, 7-Day Moving Average LHS)

Average APAC Mobility Index (% from pre-COVID-19 Levels, 7-Day Moving Average, RHS

Lifestyles have shifted, accommodating the new normal

Feb 20

Mar 20

Apr 20

May 20

Jun 20

Jul 20

Aug 20

100 90 80 70 60 50 40 30 20 10 0

100 95 90 85 80 75 70 65 60

Stringency Index* (100=Full measures of restrictions

Peak restrictions

Lower declines

Trough social activity levels

Rising restrictions

Percentage from pre-pandemic levels (100=pre-COVID-19 levels)

This too shall pass, eventually

2022

2020

2021

GDP growth (% y-o-y)

8 5 3 0 -3 -5 -8 -10

APAC

Compressing four years of e-commerce penetration into one

2024

2015

2019

2020

Australia

Hong Kong

Japan

Singapore

South Korea

40 30 20 10 0

Online sales penetration (%)

The acceleration of e-commerce penetration has amplified the undersupply of prime modern logistics facilities across select markets.

Source: M&G Real Estate based on data from Euromonitor as at September 2020. Information is subject to change and is not a guarantee of future results

It’s how one starts that determines how one finishes

6 3 0 -3 -6 -9 -12

YTD Grade A Office Effective Rental Growth (%)

Hong Kong

Sydney

Melbourne

Singapore

Perth

Brisbane

Tokyo

Seoul

Nagoya

Osaka

Shoppers have flocked towards local retail and recreation

Lockdown

Removal of restrictions

Feb 20

Mar 20

Apr 20

May 20

Jul 20

Aug 20

Sept 20

0 -10 -30 -50 -70

Singapore mobility data – Retail and recreational

*Click to reveal

High street retail/ shopping centres

Secondary offices

Commute time to work

0-10%

18%

10%

12%

16%

18%

13%

31%

21%

23%

22%

10-20%

20% +

Source: JLL, September 2020; MSCI (UK Property Monthly Index), August 2020; Macrobond, September 2020. Information is subject to change and is not a guarantee of future results.

Flexible working is already entrenched in Sweden

Commute times often grow as renters move along the lifecycle

Those at the juncture of moving out of town may relocate sooner

Home to The Centropolis Towers, South Korea continues to reflect relatively more resilient leasing fundamentals.

It’s how one starts that determines how one finishes

6 3 0 -3 -6 -9 -12

YTD grade a office effective rental growth (%)

Hong Kong

Sydney

Melbourne

Singapore

Perth

Brisbane

Tokyo

Seoul

Nagoya

Osaka

The varying starting positions of APAC office markets pre-pandemic, have impacted their performance through this year.

Modern logistics facilities, like Atsugi Nairiku Logistics Centre in Tokyo, have seen strong interest from e-commerce and third party logistics providers, attracted by large floor plates and ramp up access.

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Residential Private Rented Sector

Urban logistics

Foodstores

Student Accommodation

Hotels

Purpose Built Student Accommodation

Senior living

Northern European shopping centres

Polish offices

Secondary logistics

Dutch Private Rented Sector

Nordic logistics

German offices

Secondary grade assets

Forward funding

Hong Kong Central District offices

High street retail

Suburban retail

Logistics in developed economies

Japanese multifamily housing

Oct 20

Residents have access to designated work space at our Picture House scheme in Ilford.

2007

Retail

Office

The Private Rented Sector has shown resilience before

2008

2009

2010

2011

115 110 105 100 95 90 85 80

Rental value index (base - 100: 2007)

PRS

Industrial

20% +

10-20%

0-10%

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The pandemic has propelled us into a new era. But what constitutes the new normal for real estate?

The world that COVID built

The views expressed represent the opinions of M&G Investments which are subject to change and are not intended as investment advice or a forecast or guarantee of future results. Stated information is provided for informational purposes only. It is derived from proprietary and non-proprietary sources which have not been independently verified for accuracy or completeness. While M&G Investments believes the information to be accurate and reliable, we do not claim or have responsibility for its completeness, accuracy, or reliability. Statements of future expectations, estimates, projections, and other forward-looking statements are based on available information and management’s view as of the time of these statements. Accordingly, such statements are inherently speculative as they are based on assumptions which may involve known and unknown risks and uncertainties. Actual results, performance or events may differ materially from those expressed or implied in such statements. M&G Investments is a direct subsidiary of M&G plc, a company incorporated in the United Kingdom. M&G plc and its affiliated companies are not affiliated in any manner with Prudential Financial, Inc, a company whose principal place of business is in the United States of America or Prudential Plc, an international group incorporated in the United Kingdom. M&G Investment Management Limited is registered as an investment adviser with the Securities and Exchange Commission of the United States of America under US laws, which differ from UK and FCA laws. All information is correct as at the date shown above unless otherwise stated.

Office net additions to stock have been trending below 2% per annum over the last decade. Compared to previous cycles, we are facing an era of under-building, with future pipelines also restricted. Across office markets, some of Europe’s largest cities boasted vacancy rates below 3% at the start of 2020, including Paris, Munich and Amsterdam. This compares to vacancy rates north of 8% leading up to the Global Financial Crisis. Whilst this will not prevent rental declines, it will at least soften the downside impact.

(f)

The undertaking to 'build back better' requires a proactive investment approach and real estate has a crucial role to play. The transition to net zero carbon emissions by 2050 is a major challenge, however a world with sustainable investments is intrinsically less vulnerable. The gap between sustainable and ‘stranded’ assets is likely to expand, as a consequence.

Information is subject to change and is not a guarantee of future results

Information is subject to change and is not a guarantee of future results.

Source: MSCI Annual Digest, 2019 and MSCI Residential Digest 2019. Information is subject to change and is not a guarantee of future results.

Terms and conditions

November 2020

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These Terms, as amended by us from time to time, set out the basis on which you may use this Website and provide information about the way we provide any M&G financial products and related services detailed on this Website. The content of this Website is intended for institutional investors only unless specifically indicated otherwise. These Terms are effective from December 2014. We may change them from time to time by updating this pages so please revisit and reread it periodically. We may change the content or availability of any of the information available through this Website (including by changing these Terms) or add additional services.

4. Disclaimer: Reliance on information posted and security

Whilst M&G uses every reasonable effort to ensure the accuracy of the information contained on this Website which was prepared by or on behalf of M&G (as distinct from third part content – see “Disclaimer: Links, third party information and websites” below) as at the publication, all such information is provided “as is” and this means that except where prohibited by law no warranties are given, whether express or implied, as to the reliability, accuracy, suitability or completeness of the information. No company in the M&G FA Limited group, which includes M&G, accepts any liability for any use, or misuse, of the information presented on this Website or any loss or damage which may arise from access to or reliance on information published on this Website, except where that liability may not be excluded or limited by law. Accordingly, to the maximum extent permitted by law, we provide you with this Website on the basis that we exclude all representations, warranties, conditions and other terms which are not expressly set out in these Terms (including our Privacy and Cookies Policy). This does not affect any mandatory legal rights that cannot be excluded under applicable law. Nothing in these Terms shall limit or exclude our liability (if any) for: a) fraud or fraudulent misrepresentations; b) personal injury or death resulting from our negligence; c) our breach of our statutory obligation to provide the website and related services with reasonable skill and care; or d) any other matter for which it would illegal for us to exclude, or attempt to exclude, liability. We take all reasonable precautions to seek to keep secure all confidential information you send to us, including precautions against unauthorised access or loss. In common with all website operators, we cannot guarantee the security of any data transmitted by Internet email or through this Website. Please do not communicate with us by these methods unless you accept the security implications of dealing online. We strongly recommend that you do not send us any confidential information or commercially sensitive information or sensitive personal data (e.g. data about health or medical conditions, actual or suspected crimes) by email or through this Website. Communications sent by you via Internet email, or through this Website, are sent at your own risk.

3. Accessing this website and our services

You are responsible for making all arrangements necessary for you to have access this Website and for all telephone, internet service provider and other costs incurred in accessing and using this Website. You are also responsible for ensuring that all persons who access this Website through your internet connection are aware of these Terms (including our Privacy and Cookies policy and that they comply with and accept them, as relevant. Unless otherwise indicated, you are only permitted to use this Website for your own personal, non-commercial purposes and you may not in any way resell any of these services or make these services available to any third party. Institutional investors and their advisors and representatives are only permitted to use this Website in relation to its/theirs investment activity and not for any other commercial purpose. You must not establish a link to any pages of this Website from another website or document without our prior written consent. See “Contact Us” below. You agree that you will provide us with full and accurate details whenever you submit personal information through this Website and that you will promptly notify us in writing if those details change at any time. See “Contact Us” below. We may stop the provision of any services to you through this Website if we discover or have reason to suspect that the information or details you have given to us is/are false, misleading , inaccurate or incomplete. Whilst M&G uses every reasonable effort to maintain the availability of this Website, we cannot guarantee its availability or the continuation of the services offered through it or that access will be interrupted or error free. From time to time, we may restrict access to some parts of this Website, or this entire Website, to users irrespective of whether they are registered users, as relevant.

8. Receipt and sending of communications

Communications which we send you by email will be deemed received by you immediately upon sending. We will not be obliged to seek any acknowledgement of receipt from you in respect of such emails. No company in the M&G FA Limited group, which includes M&G, accepts liability for any delay or failure of delivery (for whatever reason) of any such email except where that liability may not be excluded or limited by law (see above). If we have addressed such communications to your email address, then we will not have breached any duty of confidentiality owed to you, even if they are seen by any other person as a result. Communications sent by you to us by email will be deemed received by us upon actual receipt by a system under our control.

7. Information you submit through this website

You agree that you will not: • Place on or submit through this Website any information or material which is abusive, illegal, threatening, defamatory, obscene, pornographic, discriminatory or otherwise offensive or which constitutes or encourages conduct that would be considered a criminal offence, give rise to civility liability, or is otherwise contrary to the law or would infringe on the rights of M&G or any other companies in the M&G FA Limited group, or those of any third party; • Place on or submit through this Website any information or material which is abusive, illegal, threatening, defamatory, obscene, pornographic, discriminatory or otherwise offensive or which constitutes or encourages conduct that would be considered a criminal offence, give rise to civility liability, or is otherwise contrary to the law or would infringe on the rights of M&G or any other companies in the M&G FA Limited group, or those of any third party; • Place on or submit through this Website viruses, trojons, worms, logic bombs or other material which is malicious or technologically harmful; • Interfere with the operation or content of this Website. Any attempt to damage this Website may be illegal and we reserve the right to seek damages from you in relation to that an in accordance with the applicable law. No company in the M&G FA Limited group, which includes M&G, accepts any liability for any loss or damage caused by any viruses or other technologically harmful material that may infect your PC or other device, computer programs, data or other proprietary material due to your use of this Website or to your downloading of any material posted on it, or on any website linked to it, except where that liability may not be excluded or limited by law (see above).

6. Copyright and trademarks

Except where indicated otherwise, the copyright subsisting in the content on this Website and in the materials made available through this Website, including all information, text, images and layout, is the exclusive property of M&G or another company in the M&G FA Limited group. You are only permitted to print, copy, download or temporarily store extracts of the same as strictly necessary and for your personal use, provided that you do not change or remove any copyright notices. You are not permitted to copy or distribute or otherwise make available or communicate to the public any part of the same. All copyright and other intellectual property rights shall continue to be held by M&G or the other companies in the M&G FA Limited group, as relevant, and no rights of any kind in it shall pass to you. Copyright in certain content and materials is owned by third parties and is reproduced on or made available through this Website with the permission of the third party copyright owners. The trademarks and logs shown on this Website are either owned by M&G, other companies in the M&G FA Limited group, or a third party. No rights are granted to use any trade marks on this Website without the prior written consent of M&G.

5. Disclaimer: Links, third party information and websites

This Website may contain, or be linked to, advice or statements from third parties. No company in the M&G FA Limited group, which includes M&G, makes any representation as to the accuracy, completeness, timeliness or suitability of such information and we have not, and will not, review or update such information. Any use made of such information is at your own risk. Some of the information contained on this Website may have been prepared or provided by third parties and may not have been verified by us. Except where prohibited by law (see above), no warranties are given, whether express or implied, as to the reliability, accuracy, suitability or completeness of any such information. No company in the M&G FA Limited group, which includes M&G, accepts any liability for any use, or misuse, of the information presented on this Website or for any loss or damage which may arise from access to our reliance on information published on this Website, except where that liability may not be excluded or limited by law (see above).The links we provide from this Website to other websites are provided for information only. Other sites may link to this Website. We do not assume any responsibility or liability with respect to any website accessed via our Website or linking to this Website for any of the content on those websites. Those websites will have their own terms and privacy policies you should read them carefully before using those sites. The presence of any advert on this Website is not an endorsement of goods, services business or website advertised.

12. Severance

If any part of these Terms is determined to be invalid or unenforceable pursuant to applicable law including, but not limited to, the warranty disclaimers and liability limitations set forth above, the other provisions will remain in force. If any invalid, unenforceable or illegal provision would be valid, enforceable or legal if some part of it were deleted, the provision shall apply with whatever modification is necessary to give effect to the actual intent of the parties.

11. Waiver

If we do not exercise any right or remedy which we have under these Terms this does not mean we have waived our right to it or any other right or remedy of ours.

10. Assignment of rights and sub-contracting

We may, at any time, assign any or all of our rights or obligations under these Terms to any person. This includes but is not limited to any person which takes on responsibility for operating this Website or provides the M&G investment products and related services. This includes assignments where necessary as part of any restructuring relating to M&G and its business or assets, or as part of a sale of M&G or, as relevant, another company in the M&G FA Limited group, or its/their assets. Any rights granted to you and obligations incurred by you under these Terms are personal to you and may not be transferred to any third party. We may, at any time, sub-contract the performance of all or any of our obligations under these Terms.

9. Jurisdiction and applicable law

Use of this Website and the content and materials available on or through this Website, together with these Terms are governed by and interpreted in accordance with English law and you agree to submit to the exclusive jurisdiction of the English Courts.

15. Contact us

14. Entire agreement

These Terms (including our Privacy and Cookies Policy ) contain the entire agreement between you and us regarding their subject matter and they superseded all prior communications, representations, warranties, stipulations, undertakings and agreement between the parties. Nothing in these Terms shall, however, operate to limit or exclude the liability of either party for any fraudulent misrepresentation.

13. Relationship

You agree that no joint venture, partnership, employment, or agency relationship exists between you and us as a result of these Terms or your use of this Website.

PART B

We, i.e. M&G Investment Management Limited promote the packaged products and services of M&G Securities Limited, M&G Real Estate Limited and Prudential Pensions Limited including mutual funds operated or managed by M&G companies (the “M&G Funds”). We do not give advice or make personal recommendations to investors. M&G does not offer tax or investment advice or make recommendations regarding investments. Fees paid to persons who introduce business to M&G (“introducer services”) are paid for by fund managers and other persons to whom we introduce business. We do not charge investors for our introducer services. Our registered office is at 10 Fenchurch Avenue, London EC3M 5AG. You can also contact us at info@mandg.co.uk These companies are registered for VAT, number GB 235323781. We are authorised and regulated by the Financial Conduct Authority, which can be contacted at 25 The North Colonade, Canary Wharf, London E14 5HS. Investors, who qualify for compensation under the Financial Services Compensation Scheme Rules, are protected for any amounts that we are unable to pay up to a maximum of £50,000 for each investor and subject to the rules of the Scheme. Whether the Financial Services Compensation Scheme will pay compensation or not depends on its rules and in practice compensation is more likely to be paid to a retail client than to a professional client. This Website is provided exclusively for the information and use of Institutional Investors and other persons to whom financial services may be promoted in accordance with articles 19 and 47 to 51 of the Financial Services and Market Act 2000 (Financial Promotion) Order 2005. Any person who does not fall within this description may not access, use or rely on this Website and the information contained in it. Materials and information found on this website are not for onward distribution. The information and materials found on this website are for informational purposes only and are not an offer to sell or purchase interests in any M&G Fund. Shares in M&G Funds have not been and will not be registered under the United States Securities Act of 1933, as amended, or registered or qualified under the securities laws of any state of the United States and may not be offered, sold, transferred or delivered, directly or indirectly, to any investors within the United States or to, or for the account of, US Persons, except in certain limited circumstances pursuant to a transaction exempt from such registration or qualification requirements. The Funds will not be registered under the United States Investment Company Act of 1940, as amended. Any offer to sell or purchase of any interest in an M&G Fund must be made pursuant to local laws of the relevant jurisdiction in which such interests are offered. M&G Funds are not registered for distribution in Canada. M&G cannot accept any subscriptions into its Funds from investors resident in Canada. M&G Investments is a direct subsidiary of Prudential plc, a company incorporated in the United Kingdom. Prudential plc and its affiliated companies constitute one of the world’s leading financial services groups and is not affiliated in any manner with Prudential Financial, Inc, a company whose principal place of business is in the United States of America.

PART A

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Hard-hit sectors like aviation, automotive and high street retail could see a rise in business failures, resulting in more secondary logistics space returning to the market. The North West and Midlands have significant exposure to such industries and are therefore more exposed to downside risks.

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PART B

PART A

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