Global Real Estate Investors Plan to Increase Purchases in 2018, CBRE Survey Finds
15 Mar 2018
Industrial & Logistics is Most Attractive Asset Class for Investors in 2018
Global Interest in Real Estate “Alternatives” Grows Significantly
North America Still Top Regional Target as Western Europe Rises in Popularity
Global commercial real estate investors are planning more acquisitions in 2018 compared to last year, with industrial and logistics (I&L) the most targeted asset class, according to the CBRE Global Investor Intentions Survey 2018.
The 2018 survey reveals that the balance between those investors planning to spend more on commercial real estate over those planning to spend less is 33%–up from 24% last year and reversing a three-year trend in the other direction. The balance of investors planning to sell more real estate over those planning to sell less rose to 27% from 15% in 2017, signaling a potential increase in market liquidity.
“Investors are taking advantage of the current strength of the market to diversify and make necessary changes to their portfolios. Planned acquisitions will be balanced by disposals, which is healthy for the marketplace and is likely to ease downward pressure on cap rates. While investors remain interested in core and gateway markets, they are also willing to go beyond in search of income and are targeting emerging real estate sub-sectors, such as retirement and student housing. This is positive for portfolio returns and also ensures that capital meets the needs of a changing society,” said Chris Ludeman, Global President, Capital Markets, CBRE.
Globally, income (38%) is the key factor motivating investors to place capital in real estate this year. This is consistent across regions and has been trending up over time. Commercial real estate’s ability to offer diversification, both by asset class and geographically, is also considered an important factor by global investors.
I&L (41%) is the most popular real estate sector for global investors in 2018, followed by office (21%) and multifamily/Private Rented Sector (PRS). On a regional basis, I&L is the most attractive sector in the Americas, with office falling behind multifamily. In APAC, office is still the preferred sector for investors due to the size of that region and its relative liquidity, while I&L is benefiting from increased interest due to structural changes in the region. In EMEA, offices and I&L are even in terms of preference, although logistics has seen a steep year-over-year increase in interest.
Global interest in real estate “alternatives” has grown significantly, with 67% of investors actively pursuing opportunities in assets like senior and student housing in 2018. Retirement living has seen the greatest growth in investor interest, as thoughtful investors seek to capitalise on demographic change in advanced economies toward an older population structure, as well as more standardized retirement living solutions. Student housing has also increased in popularity, especially in EMEA.
North America (39%) is the top regional destination for global real estate capital, despite rising interest rates reflecting a potent mix of economic growth and currency weakness. Western Europe (32%) has seen a rise in popularity, due to improving economic fundamentals and recent elections in key markets such as France and the Netherlands. In APAC, relative preference for “Developed Asia” has grown, with much of this increase attributable to Asian investors shifting from North America as their preferred location.
“Our research suggests another strong year for global real estate, with investors remaining positive about its ability to provide income return and diversification benefits, along with the continued emergence of interesting new sectors. That said, investors remain apprehensive about the potential for global ecomomic shock or interest rates that increase faster than now expected,” said Richard Barkham, Global Chief Economist, CBRE.
CBRE Group, Inc. (NYSE:CBRE), a Fortune 500 and S&P 500 company headquartered in Dallas, is the world’s largest commercial real estate services and investment firm (based on 2021 revenue). The company has more than 105,000 employees (excluding Turner & Townsend employees) serving clients in more than 100 countries. CBRE serves a diverse range of clients with an integrated suite of services, including facilities, transaction and project management; property management; investment management; appraisal and valuation; property leasing; strategic consulting; property sales; mortgage services and development services. Please visit our website at www.cbre.com.