According to Damian Harrington, Head of EMEA Research at Colliers International, there are three key elements, that will impact economies and commercial real estate in the EMEA region: international trade, corporate investment, and climate change.
“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 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,” Harrington claimed.
He added that if Biden can enact change, a larger fiscal stimulus will likely counteract 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.
Besides, 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.