This article is from the Australian Property Journal archive
MORE than $US1 trillion of capital is targeting the global real estate markets – 6% higher than 2015, with Sydney and Brisbane on investors’ radar, according to CBRE.
According to the CBRE Global Investor Intentions Survey 2016, conducted between January and early February, asked investors how much capital (gross acquisitions) they would deploy in real estate purchases this year.
Respondents said approximately US$1.16 trillion of capital targeting property investment in 2016 – an increase of 3% from 2015 levels in local currency terms.
CBRE capital markets global president Chris Ludeman said investors continue to find real estate appealing, chiefly due to the relatively higher returns and stability on offer.
“We believe that 2016 will be another active year for the global real estate investment market, with capital flows 6% higher than in 2015. There is more than US$1 trillion of capital targeting real estate in 2016 and this volume of expenditure will maintain support for global real estate prices,” he added.
The majority of investors (82%) indicate that their buying activity will increase or remain the same compared to 2015. While these results are down slightly from the last two years – 86% in 2015 and 93% in 2014 – this is not indicative of widespread concern about the short- or medium-term performance of real estate as an asset class. More likely, it reflects some concerns about pricing, the direction of US interest rates and current volatility in equities.
The survey also found a jump in demand for core assets and a decline in interest in good secondary and value-add properties. 21% of survey respondents said their risk appetite for secondary assets is higher in 2016 compared to last year, down significantly from 37%. If this plays out, it is likely that the spread between prime and secondary yields will begin to widen, following several years of compression.
In terms of asset classes, office (30%) remains the most popular property type globally, though interest is down slightly compared to last year. There is a notable uptick in interest for retail (21%) and multifamily assets (20%) from 2015.
“Investment strategies are shifting amid concerns about the health of the global economy. Not surprisingly, 2016 looks likely to be a “risk-off” year, with investors reporting they are more focused on core assets and less likely to seek secondary, value-add and alternative opportunities,” Ludeman said.
North America is the most popular destination for investment (48%), ahead of Western Europe (26%), the results are similar to 2015.
In the Americas, Los Angeles, New York and Dallas-Ft. Worth are the top three targets of preference.
In Asia Pacific, Sydney and Tokyo are the most popular destinations – exchanging places since 2015. Notably, there are now two Australian cities among the top five: Sydney and Brisbane.
CBRE executive managing director, capital markets, Pacific Mark Granter noted that Brisbane has moved up the list of preferred destinations for capital, which may suggest that investors are looking for counter cyclical opportunities as the market approaches the bottom of the cycle.
Australian Property Journal
