Global investors are betting big on real estate as their planned expenditure on the asset class is likely to cross $1 trillion in 2016, up 6 per cent in dollar terms from 2015, according to a report by real estate consultancy firm CBRE.
Most investors (82 per cent) indicated that their buying activity will increase or remain the same compared with 2015, the report said. While this number is down slightly from the last two years, CBRE said it doesn’t indicate widespread concern about the sector’s performance but reflects some concerns about pricing, the direction of US interest rates and volatility in equities.
“Investors continue to find real estate appealing, chiefly due to the relatively higher returns and stability on offer. There is more than $1 trillion of capital targeting real estate in 2016 and this volume of expenditure will maintain support for global real estate prices,” said Chris Ludeman, global president, capital markets, CBRE.
He said that investment strategies are shifting amid concerns about the health of the global economy. He added that 2016 is 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.
Anshuman Magazine, chairman and managing director, CBRE South Asia Pvt Ltd, said India’s real estate sector will also get some benefit, albeit a small share, of the global real estate investment funds.
North America will remain the most popular destination for investment (48 per cent), followed by Western Europe (26 per cent). The report said the results are similar to 2015 and consistent with the relative sizes of the investable property markets in these locations. But it added that there is an increase in interest in Central and Eastern European markets due to the pace of economic recovery in that region and relatively attractive pricing.
In Europe, Middle East and Africa, London topped the list of target cities. 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. Richard Kirke, managing director, capital markets, CBRE Asia Pacific, said Australia will remain popular among international investors, in particular those from China and Singapore, while foreign investment in Japan is expected to be led by North American investors.
Interest in cross-border investment remains strong, with two of five respondents stating they are seeking opportunities outside their home region. This is especially true of Asia Pacific-based investors, particularly South Korean and Singaporean, who are more likely to invest outside their home region than their counterparts in the Americas and Europe, Middle East and Africa, the report said.
In terms of asset classes, office (30 per cent) remains the most popular property type globally, though interest is down slightly from last year. There is an uptick in interest for retail (21 per cent) and multifamily assets (20 per cent) from 2015.