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Real estate Neil Cable Head of European Real Estate Investments Challenges ahead but with potential opportunities Against a volatile economic backdrop, the real estate market’s focus is shifting towards the ongoing cashflow available over the next 12 months. As the tightening cycle slows and rates stabilise, however, opportunities should begin to emerge for investors prepared to take them. The coming year is likely to be a challenging one for Chart 8: European real estate set to reprice after real estate but should also create opportunities to spreads narrow more quickly than expected lock in higher yields and generate long-term value. 8 Signs of recovery in the wake of higher lending 6 rates could seem elusive in the first half of 2023. 4 Private markets are not as liquid as their public 2 counterparts and, as their pricing trends can lag 0 other asset classes, they may continue to decline -2 -4 over the first two quarters of the coming year. LogisticsOfficeDIYRetail WarehouseResidentialLogisticsOfficeRetail WarehouseLogisticsOfficeRetail WarehouseResidentialLogistics - LondonLogistics - RegionLogistics - West EndOffice - RegionRetail Warehouse But that will be precisely the period in which purchasers have the greatest negotiating power. Yields will rise further to reflect tighter financial conditions, but we don’t expect a cycle like that of the 1990s, nor that prices will sink to the lows of Germany France Netherlands UK the Global Financial Crisis. There are still plenty Spread over Eurozone Investment Grade bond yields 2021 of buyers in real estate and, given private market Spread over Eurozone Investment Grade bond yields 2022 investments have become a key part of many well-diversified portfolios, there is unlikely to be a Source: Fidelity International, CBRE, September 2021 and September 2022; Bloomberg, as at 30/09/2021 and 26/09/2022. wholesale withdrawal of capital from the space. 19 Investment Outlook Fidelity International

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