GLOBAL INVESTMENT ATLAS - A CUSHMAN & WAKEFIELD INVESTMENT REPORT - Le Moci
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GLOBAL
INVESTMENT
ATLAS
A CUSHMAN & WAKEFIELD
INVESTMENT REPORT
GLOBAL INVESTMENT ATLAS
CONTENTS
01 THE MARKET
AHEAD 03 SECTOR
TRENDS 05 CLIMATE
CHANGE
PAGE 06 PAGE 22 PAGE 40
02 AN UPDATE
ON 2018 04 REGIONAL
TRENDS 06 OUTLOOK
& STRATEGY
PAGE 12 PAGE 30 PAGE 46
07 APPENDICES
PAGE 56
04 / GLOBAL INVESTMENT ATLAS 2019
GLOBAL INVESTMENT ATLAS 2019 /05
01 THE MARKET
AHEAD
GLOBAL INVESTMENT ATLAS
06 / GLOBAL
GLOBAL INVESTMENT
INVESTMENT ATLAS
ATLAS2019
2019
01
2018 exceeded
THE
MARKET AHEAD
HOWEVER, CONDITIONS
SOFTENED AS THE
Indeed, in today’s connected and
environmentally-conscious world
expectations,
the margins for error are tighter
YEAR PROGRESSED, than ever, and the pace of change is
WITH Q4 SEEING AN only set to accelerate as advances
with global 11% DROP IN VOLUMES
COMPARED TO 2017 AND
in technology, living and working
habits change how people interact
investment FAILING TO DELIVER with property and therefore what
occupiers expect from their buildings.
ANYTHING LIKE THE
volumes hitting BOUNCE USUALLY SEEN. An increasing focus is rightly being
placed on flexibility and mixed-use,
a new record In reality all global investment
markets, not just property, have
while the sharing economy is leading
to new patterns of leasing and space
high, climbing been tested in recent months
as monetary policy has evolved
configuration, and opening up new
sources of income for landlords.
4% on the year. and geopolitical tensions have
rumbled on. This has resulted
Hence while an abundance of
capital will continue to drive the
in heightened volatility and real
market and sustain pricing in 2019,
uncertainty in investment strategies
performance will be reliant on the
over where risk and value lie.
occupier, on innovation, and on
With a stable, contracted income tapping into added services.
and exposure to growth and
inflation, real estate is one product
that continues to be attractive
in this environment, and investor
demand remains strong for the right
product. However, defining the right
product has become increasingly
difficult as occupier strategies are
reshaped by e-commerce, social
and business change, low growth,
and affordability constraints.
GLOBAL INVESTMENT ATLAS 2019 /07
M AC R O D R I V E R S F I G U R E 1 : G LO B A L I N V E ST M E N T VO LU M E S A N D Y I E L DS
The economic environment Global Investment Volumes and Yields
is weaker than predicted
just a few months ago, $2,000 8.0%
but so too is the inflation $1,800
outlook on a global basis. 7.5%
$1,600
As a result, while risk is up,
the day of reckoning on $1,400
7.0%
USD Billions
Prime Yield
interest rates for corporates $1,200
and investors has again
$1,000 6.5%
been delayed. 2019 is
therefore set to see a $800
further extension of the 6.0%
$600
cycle, offering investors
another chance to get $400
5.5%
their portfolio into shape $200
for what is to come. $- 5.0%
As a result, we anticipate a 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
fore
modest increase in activity
as investors target a wider EMEA Americas Asia Pacific Prime Office Yield
range of markets to find
opportunity, and more Source: Cushman & Wakefield, RCA
sellers come forward as
strategies adjust. Pricing Acting on climate risk will similarly be important. With the built environment
will edge ahead; however, responsible for around 40% of global greenhouse gas emissions, it is critical that
this will be driven by stable the sector gets its act together to help meet the Paris Accord targets, with actions
yields and steady rental including recycling, efficiency, tech monitoring, resilience and use of renewables.
growth for the best assets. This can contribute to reduced running costs, better employee goodwill, brand
What is certain is that enhancements and potentially higher capital values as evidence grows of investor
capital flows will be even preference for green buildings. This, however, has been known for some time. What
more dynamic, more cross- is different now is that changes to policy, regulation and indeed the climate itself are
border and more about likely within the lifespan of investments being made today: meaning investors must
balancing quality with take action now and deepen their engagement with suppliers, regulators and users
quantity - this will be true in the process. While an upside risk is always preferable, investors who ignore these
whether about stock, yields, forces, both natural and market, do so at their own peril risking a loss of liquidity,
talent or living standards. higher insurance premiums, and weakened tenant demand if no action is taken.
08 / GLOBAL INVESTMENT ATLAS 2019
STRATEGY FOR 2019/20:
Given the split Investors should also be are exposed to their more albeit in a more mixed-use
alert to the potential for attractive medium-to- environment. An increasing
between cyclical cyclical growth markets long term growth trends. premium should be put on
drivers of growth to bounce as the year placemaking in core, value
For core plus and value
and interest rates progresses if we do indeed
add opportunities, there is
add and opportunistic
on one hand, and see a pause in interest
an attractive yield spread
strategies. Similarly,
rate increases, more platform acquisitions and
structural forces stability in China, progress
for some secondary
joint ventures should be
markets offering growth
on the other, the on trade talks and of
and repositioning potential.
a target for cross-border
best way to define course some resolution
However, selectivity is
capital across all risk
to the Brexit mess. profiles, helping to marry
current strategy key, with a focus on larger
equity with expertise.
is as a barbell, Core investors should seek gateway submarkets and
value in major gateway high-quality challenger Investors must be alert
with a focus on markets. Higher build cities as well as some to the fact that structural
secure defensive costs are reducing the decentralised markets. forces will be driving
stock at one end potential gains coming
For opportunistic players,
areas of outperformance,
and innovative, from development and also
selective emerging markets
even as the cycle slows,
raising affordability issues. and therefore there is a
tech-driven growth This will keep a lid on new
from Vietnam to Brazil and
real need to look beyond
sectors at the supply, and put core rents
Russia may hold potential.
market averages to see
However, there is also
other, with caution for existing space under
scope in more mature
the detail of the local
pressure. Global investors market, the deal, the
towards the middle also need to include Asian
markets for developing and
vendor, the lender and
as disruption gateway cities on their
redeveloping city centre
above all, the user.
space, with an emphasis
gathers pace. target list, to ensure they
on offices and multi-family
THE LOGISTICS NICHE SECTORS GLOBALLY THE OFFICE IT MAY BE TIME TO
REVOLUTION IS ONGOING WILL PLAY AN MARKET IS PERHAPS RETHINK RETAIL, WITH
AND THE SECTOR HAS INCREASING ROLE IN BEST PLACED TO WINNERS AND LOSERS
MOVED FROM BEING AN THE MARKET AND IN PERFORM WELL IN NOW EMERGING.
ENABLER FOR BUSINESS BALANCING PORTFOLIO THE NEXT 1-2 YEARS,
The sector faces more pain
TO DRIVING BUSINESS PERFORMANCE. AS A FUNCTION OF
as e-commerce develops
FAILURE OR SUCCESS. LOW SUPPLY AND
Liquidity and risk do but repricing is now being
ROBUST DEMAND.
In a real estate context, still differ for some as seen, and opportunities are
this shift is global, opening a function of maturity While the sector is among emerging where there is an
up opportunities in more and scale, and regional the most cyclical and attractive risk premium for
markets in all regions. patterns are also often volatile, it is also the most assets in locations we know
varied, with most not international and easy to will prevail in the future.
Core urban areas with
yet global in nature. understand across borders.
high barriers to entry Core locations in big
are universally attractive, The most global is What is more, it is seeing cities offer opportunity,
while large-scale facilities hospitality, but managed structural changes to particularly in a mixed-
serving urban areas and student housing are how space is used, and use setting and some
should be targeted, maturing, and data centres the role of the landlord decentralised centres,
albeit with caution on have clear potential. and operator, which retail parks and outlet
how developments such Demographically and will increase the profit centres are starting to
as driverless lorries socio-economically driven potential of the best trade at attractive pricing.
could impact future sectors from self-storage located and managed
transport patterns. to health will retain a local office-led schemes.
flavour, but are nonetheless
emerging in many areas.
10 / GLOBAL INVESTMENT ATLAS 2019
GLOBAL INVESTMENT ATLAS 2019 /11
02 AN UPDATE
ON 2018
GLOBAL INVESTMENT ATLAS12 / GLOBAL INVESTMENT ATLAS 2019
02
Transaction
AN UPDATE
ON 2018
EXCLUDING DEVELOPMENT, TRANSACTION
VOLUME INCREASES OF 3.7% Y/Y LED TO THE
volumes SECOND HIGHEST YEAR POST-GFC, JUST -2.5%
BEHIND THE PREVIOUS PEAK ACHIEVED IN 2015.
surpassed
2017’s figures by A R E V E R SA L O F F O R T U N E S? ST R O N G E R B U T
M O R E F O C U SS E D
3.9% last year, In 2017, North America was the
only region to experience an overall Cross-border investment improved on
making annual volume decline. Last year, however,
despite higher borrowing costs, the
the year, led by stronger continental
flows. However, the targets narrowed,
investment, boost to the US economy through
late-cycle tax stimulus led the region
with only 63 markets targeted by
foreign capital, compared to 76 in
including to outperform, both as a target and
a source of real estate investment.
2017. EMEA retained its historical
position as the most sought-after
development By comparison, weakened demand
was seen across EMEA, Latin
destination for international capital,
with European cities predominantly
land, the America and Asia Pacific (excluding
development), with uncertain
dominating the top ten cross-border
investment targets. Excluding land for
strongest on political situations in some regions
and high valuations or a shortage of
development, APAC investors pulled
back on cross-border purchases,
record. investable stock in others, putting
pressure on transaction volumes.
whilst strong international interest
from North American REOCs
boosted outflows from the region.
F I G U R E 2 A : C H A N G E I N I N V E ST M E N T VO LU M E ( % PA )
Change in Investment (%pa) Office Prime Yie
20% 0
-5
15%
-10
-15
10%
-20
-25
5%
-30
0% -35
-40
-5% -45
EMEA Americas APAC Americas Eu
Source: Cushman & Wakefield, RCAGLOBAL INVESTMENT ATLAS 2019 /13
14 / GLOBAL INVESTMENT ATLAS 2019
THE
INVESTORS
I N T E R N AT I O N A L N O R T H A M E R I CA L E A DS S P E N D I N G R E M A I N S DY N A M I C
APPETITE T H E PAC K German capital rounded out the top
Although all regions were active Overall non-domestic capital three sources of cross-border investment,
buyers last year, North America deployment improved with Austrian and Swedish residential
was the only capital source to compared to 2017. Including units of particular interest to German
increase overall CRE allocations sites for development, REOCs. Despite UK investment managers
compared to 2017, with APAC investors dominated strengthening their continental portfolios,
volumes increasing 15.5% y/y. international flows. However, French cross-border investment outflows
APAC capital, by comparison, the most active source of outpaced the UK for the first time on record.
decreased by -0.8% y/y, largely outbound investment capital The make-up of cross-border investment
due to fewer global purchases. when excluding land came from Asia Pacific likewise altered, with
However, robust levels of from North America, as both mainland Chinese and Hong Kong
domestic and continental robust growth in Canadian investors falling five places in the ranking.
spending led APAC investors outbound capital led the Singaporean outbound capital, by
to maintain the highest overall country to achieve the second comparison, grew 12.3% y/y, to place fourth
share of volumes in 2018. highest share of international for cross-border flows. Overall, property
European buyers had a similar investment, behind the US. companies and institutions pulled back on
appetite to 2017, reflected in As a result, North American investment. While developers continued
an unchanged proportion of investors were responsible to be the most active, equity funds and
total transaction volumes. for 40% of all non-domestic high net worth individuals increased their
investment flows last year. buying compared to the previous year.
FIGURE 2B: OFFICE PRIME YIELD CHANGE (BP PA) Prime
Prime
FIGURE 2C: OFFICE Office
OfficeRental
PRIME Rental
RENTALGrowth
Growth
GROWTH (% PA)
OfficePrime
Office PrimeYield
YieldChange
Change(bp)
(bp) (%
(%pa)
pa)
4.5%
4.5%
00
4.0%
4.0%
-5-5
3.5%
3.5%
-10
-10
3.0%
3.0%
-15
-15
-20
-20 2.5%
2.5%
-25
-25 2.0%
2.0%
-30
-30 1.5%
1.5%
-35
-35 1.0%
1.0%
-40
-40 0.5%
0.5%
-45
-45 0.0%
0.0%
Americas
Americas Europe
Europe APAC
APAC Americas
Americas Europe
Europe APAC
APAC
Source: Cushman & WakefieldFIGURE 3: SO U R C Eof
Sources S International
O F I N T E RCapital
N AT I O N A L CA P I TA L
$160
$140
$120
$100
USD Billions
$80
$60
$40
$20
$-
APAC Europe North MEA Latin
America America
Regional Global
Source: Cushman & Wakefield, RCA16 / GLOBAL INVESTMENT ATLAS 2019
TARGETS FOR
INVESTMENT
A PAC TA K E S T H E C R OW N
Including development land, Asia Pacific continued to attract the greatest
amount of investment, accounting for 50% of transactions in 2018. European
volumes fell by -10.0% y/y, to reflect the region’s lowest ever share of
investment, whilst the North American real estate market outperformed,
documenting growth of 16.9% y/y, and a 31% share of total investment.
Excluding development sites, the picture was more clouded. Transaction volume
declines were noted for all regions except North America, where investment
reached a post-GFC peak. Latin America and MEA reported the lowest transaction
volumes since 2009. While all sources of capital pulled back on investment
into EMEA, Latin America saw Chinese investors targeting the region.
CO N T I N U I T Y O F CA P I TA L N A R R OW I N G F O C U S
The top three cross-border investment The number of markets targeted by
targets remained unchanged compared cross-border capital declined -17.1%
to 2017, with cross-border investment y/y, with EMEA and Latin American
growing by 76.0% y/y. The US remained markets bearing the brunt of this
the most sought after destination narrowing of interest. A number
for international capital. Despite of Central & Eastern European real
investment declines from cross- estate markets were also missed off
border sources, the UK and Germany international investors’ target lists last
retained the second and third spots, year, as capital became more selective.
representing 11% and 10% of overall
international capital flows, respectively.
Targets
F I G U R E 4 : TA R G E TS Oof
F International
I N T E R N AT ICapital
O N A L CA P I TA L
$180
$160
$140
$120
$100
USD Billions
$80
$60
$40
$20
$-
APAC Europe North MEA Latin
America America
Regional Global
Source: Cushman & Wakefield, RCAGLOBAL INVESTMENT ATLAS 2019 /17
18 / GLOBAL INVESTMENT ATLAS 2019
F I G U R E 5 A : TO P 4 0 S O U R C E S O F C R OSS - B O R D E R
I N V E ST M E N TTop
BY40CO U N T RY,
Sources E XCBorder
of Cross LU D I NInvestment
G L A N D by Country, Excluding Land
United States
Canada
Germany
Singapore
France
United Kingdom
China
Switzerland
Hong Kong
South Korea
Sweden
Austria
Israel
South Africa
Netherlands
Japan
Luxembourg
Spain
Italy
Norway
Belgium
Denmark
Australia
Malaysia
Cyprus
Qatar
Taiwan
Guernsey
United Arab Emirates
Mexico
Finland
India
Jersey
Slovakia
Kuwait
Czech Republic
Macau
Romania
Saudi Arabia
Ireland
$- $20 $40 $60
USD Billions Regional Global
Source: Cushman & Wakefield, RCAGLOBAL INVESTMENT ATLAS 2019 /19
F I G U R E 5 B : TO P 40
Top 4 0Cross
C R OSS - B Investment
Border ORDER IN V E STby
Targets M ECountry,
NT excluding Land
TA R G E TS BY CO U N T RY, E XC LU D I N G L A N D
United States
United Kingdom
Germany
France
Spain
Netherlands
Australia
China
Hong Kong
Poland
Austria
Japan
South Korea
Italy
Finland
Ireland
Denmark
Canada
Sweden
Portugal
Belgium
Singapore
India
Czech Republic
Luxembourg
Norway
New Zealand
Taiwan
Brazil
Hungary
Romania
Switzerland
Malaysia
Slovakia
Bulgaria
Russia
Mexico
Croatia
Cayman Islands
Slovenia
$- $20 $40 $60 $80 $100
USD Billions Regional Global
Source: Cushman & Wakefield, RCA20 / GLOBAL INVESTMENT ATLAS 2019
GLOBAL INVESTMENT ATLAS 2019 /21
03 SECTOR
TRENDS
GLOBAL INVESTMENT ATLAS22 / GLOBAL INVESTMENT ATLAS 2019
03 SECTOR
TRENDS
Investment into land With growth of 9.7%,
the industrial sector
subsector growing 34.8%
y/y. In contrast, demand for
for development also exceeded previous
investment highs.
retail warehousing and high
street units fell by -10.2%
was the highest Distribution facilities,
the largest portion of
and -8.6% y/y respectively.
As with last year, the
on record in 2018. the industrial segment,
grew at a rate of 15.3%
sector maintained a 10%
share of total investment,
As with previous y/y, led by strong growth
in North America and
remaining below the share
typically seen in the years
years, demand APAC. Developers and
operators were the most
preceding the GFC.
was driven almost active in the industrial
sector, accounting for 24%
Offices were the only
institutionalised sector to
entirely by APAC of the global market. The
remainder was equally
experience a decline in
annual volumes, a result of
capital, although split between equity funds,
most capital sources pulling
back on their allocation to
North American
institutions and prop-cos.
the sector. North American
Retail made a comeback capital was the exception,
interest in the sector in 2018, growing by
2.7% y/y. Transaction
as office investment grew
7.9% y/y; the region’s
strengthened improvements were
down to higher shopping
REOCs displayed a
particular interest in
on the year. centre volumes, with the growing their international
office market portfolios.GLOBAL INVESTMENT ATLAS 2019 /23
F I G U R E 6 : S EC TO R S H A R E OSector
F G LOShare
B A L of
T RA D I N Trading
Global G
45%
40%
35%
30%
25%
20%
15%
10%
5%
0%
Multifamily Development Hotel Industrial Office Retail
Sites
2014 2015 2016 2017 2018
Source: Cushman & Wakefield, RCA24 / GLOBAL INVESTMENT ATLAS 2019
ALTERNATIVE
IS IN
Sector Share of Global Trading Sources of Demand
INVESTMENT INTO F I G U R E 7 A : S EC TO R S H A R E O F FIGURE 7B: SOURCES
ALTERNATIVE ASSET G LO B A L T RA D I N G OF DEMAND
CLASSES CONTINUED
TO STRENGTHEN LAST
YEAR, UP 8.4% Y/Y.
THE ATTRACTIVENESS
OF THESE ASSETS HAS
BEEN DRIVEN BY A
LATE-CYCLE HUNT FOR
YIELD, IN ADDITION TO
A DESIRE TO INCREASE
HOLDINGS OF
OPERATIONAL ASSETS
WITH A SUPPORTIVE
DEMOGRAPHIC
BACKBONE.
Hotel Student Housing Senior Housing & Care North America Europe
Multi-family Medical Tech/Telecom/Data Centre Asia Pacific International
R&D Self Storage Parking Facility MEA Latin America
Source: Cushman & Wakefield, RCA
ST U D E N T H O U S I N G
Student housing continued
to increase in importance
in Europe and North
America, with investors
attracted by the stable,
recession-resilient income
on offer. The sector has
yet to make significant
gains in APAC, where
much of the student
housing sector remains
development rather than
investment focussed.
However, a number of
regional investors have
signalled a desire to
venture into the sector,
with Japan and Australia
of particular interest due
to growing international
student numbers.GLOBAL INVESTMENT ATLAS 2019 /25
F I G U R E 7 C : A LT E R N AT I V E S A N D T H E M A I N ST R E A M M A R K E T
$2,500
$2,000
USD Billions
$1,500
$1,000
$500
$-
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Mainstream Assets Alternative Assets
Source: Cushman & Wakefield, RCA
PRS AND SUBSIDISED
HOUSING
The private rental sector
and subsidised housing
remained the most targeted
niche sector globally. North
America retained sector
dominance, unsurprising
as due to the structure of
the US residential market,
North American PRS has
long been viewed as an
institutionalised asset
class. As the fundamentals
supporting PRS have
become increasingly
attractive, European
investors have expanded
their interest in the sector,
with volume growth of
14.1% y/y in 2018, the
strongest on record.26 / GLOBAL INVESTMENT ATLAS 2019
H OT E L S CA R PA R K I N G DATA C E N T R E S M E D I CA L A N D
Growth in the sector was Investment into the sector While investment volumes CA R E H O M E S
documented across North fell -42.4% y/y, however increased in both Asia Investment volumes
America and APAC, where this was unsurprising and Europe, globally declined globally last
volumes reached multi- given the strength of the sector contracted year, although transaction
year highs. Volumes in the investment in 2017. The -48.7% y/y, but remains volumes remained above
latter were driven by single number of markets seeing 46.4% above the long-run the 10-year average. The
asset deals, whereas North transactions declined average. The issue of data global provision of medical
America saw a number of by -43.8% in 2018, with sovereignty continues centres and care homes
large portfolio transactions. transactions in only 3 to loom large, with a remains undersupplied, a
With a tourism boom European cities, compared need for governments trend that will only become
anticipated for 2019 across to ten in 2017. Investment to evolve suitable policy more entrenched as
Asia, and a number of new remains opportunity- to face the problem ageing populations in Asia,
hotel concepts coming to driven in most regions, head-on. Availability of Europe and North America
the fore in North America with a limited number of assets, and a high rate of increase healthcare
and Europe, the outlook for investable assets stifling obsolescence, will mean demand and expenditure.
the sector remains bright. transaction volumes. development remains
an attractive option.
F I G U R E 7 D : I N V E ST M E N T VO LU M E S OV E R T I M E
$400
$350
$300
USD Billions
$250
$200
$150
$100
$50
$-
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Multi-family Hotel Medical Other Hospitality
Parking Facility R&D Self Storage Senior Housing & Care
Student Housing Tech/Telecom/Data Center
Source: Cushman & Wakefield, RCAGLOBAL INVESTMENT ATLAS 2019 /27
28 / GLOBAL INVESTMENT ATLAS 2019
GLOBAL INVESTMENT ATLAS 2019 /29
04 REGIONAL
TRENDS
GLOBAL INVESTMENT ATLAS30 / GLOBAL INVESTMENT ATLAS 2019
04 REGIONAL
TRENDS
ASIA PACIFIC
Building on the success of the to experience a contraction
previous year, 2018 set a new in annual volumes last year, at
record for investment in Asia -4.8% and -64.8%, respectively.
Pacific (including land). While
As in 2017, China attracted more
domestic investors retained the
than three quarters of volumes into
majority of transactions volumes,
the region. While the developed
all sources of capital targeting the
APAC economies of Japan and
area increased investment. North
New Zealand experienced volume
American buyers were the strongest
declines, growth was documented
source of global investment into
across the majority of emerging
the region, driven by high demand
markets, driven by strong demand
for the Chinese market. Indeed,
from domestic and regional buyers,
despite trade tensions between
and Australian volumes surpassed
the US and China, US buying in
their previous 2015 peak.
the country reached record levels
last year, particularly in Shanghai. Prime office rents continued to
climb across China, Australia,
While development sites were
Singapore, and Japan, due to
the target of 80% of investment
demand outstripping supply
in the region, previous records
in core markets. Prime yields
were also surpassed in the office
experienced a modest contraction
and industrial sectors, while the
across the majority of markets,
hotel market reached its strongest
with further capital value growth
point post-GFC. Retail and multi-
set to continue into 2019.
family were the only sectorsGLOBAL INVESTMENT ATLAS 2019 /31
F I G U R E 8 : A PAC I N V E ST M E N T VO LU M E S
$300 7.0%
6.8%
$250
6.6%
6.4%
$200
6.2%
USD Billions
Prime Yield
$150 6.0%
5.8%
$100
5.6%
5.4%
$50
5.2%
$- 5.0%
08Q1
08Q2
08Q3
08Q4
09Q1
09Q2
09Q3
09Q4
10Q1
10Q2
10Q3
10Q4
11Q1
11Q2
11Q3
11Q4
12Q1
12Q2
12Q3
12Q4
13Q1
13Q2
13Q3
13Q4
14Q1
14Q2
14Q3
14Q4
15Q1
15Q2
15Q3
15Q4
16Q1
16Q2
16Q3
16Q4
17Q1
17Q2
17Q3
17Q4
18Q1
18Q2
18Q3
18Q4
Investment Volume Prime Office Yield
Source: Cushman & Wakefield, RCA32 / GLOBAL INVESTMENT ATLAS 2019
REGIONAL TRENDS:
EMEA
Volume declines of -10.8% were Industrial and office transactions
documented for the region, contracted by -24.7% and -9.7% y/y
owing to a pull-back from both respectively. However, following strong
global and domestic sources. investment volumes in recent years,
Continental investment was robust the fall in office and industrial was
by comparison, growing by 9.9% likely down to a shortage of investible
y/y. Despite the decline in global stock. By comparison, European
investment EMEA, and specifically multi-family investment continued to
Europe, remained the most sought strengthen, with increasing demand
after region by global capital, for the counter-cyclical sector in
with 53% of all global transactions Western and now Central Europe.
occurring within the region.
Rental growth continued in 2018,
European retail documented its third with emerging European countries
consecutive year of decline, with driving performance. Prime yields
lower volumes across much of the tightened as the limited supply of
region. This was caused by changes available product pushed valuations
in consumer habits, selective higher, but Western yields stabilised
investor demand, and further in the closing months of the year.
compounded by the continuing
differential between vendor and
purchaser pricing aspirations.GLOBAL INVESTMENT ATLAS 2019 /33
F I G U R E 9 : E M E A I N V E ST M E N T VO LU M E S
$160 8.00%
$140
7.50%
$120
7.00%
$100
USD Billions
Prime Yield
$80 6.50%
$60
6.00%
$40
5.50%
$20
$- 5.00%
08Q1
08Q2
08Q3
08Q4
09Q1
09Q2
09Q3
09Q4
10Q1
10Q2
10Q3
10Q4
11Q1
11Q2
11Q3
11Q4
12Q1
12Q2
12Q3
12Q4
13Q1
13Q2
13Q3
13Q4
14Q1
14Q2
14Q3
14Q4
15Q1
15Q2
15Q3
15Q4
16Q1
16Q2
16Q3
16Q4
17Q1
17Q2
17Q3
17Q4
18Q1
18Q2
18Q3
18Q4
Investment Volume Prime Office Yield
Source: Cushman & Wakefield, RCA34 / GLOBAL INVESTMENT ATLAS 2019
REGIONAL TRENDS:
LATIN AMERICA
Last year was the weakest on transport network, Chinese
record for commercial real estate investment into Latin and South
trading in Latin America, with American logistics facilities
tumultuous elections in Brazil, strengthened. More generally, APAC
Mexico, Costa Rica and Colombia investors increased their exposure
suppressing appetite for emerging to the region, as investment growth
market assets. Overall, transaction reached triple digits and hotel
volumes fell -41.1% y/y. A pullback and development land benefited.
in investment from both domestic Perhaps unsurprisingly given the
and continental capital was linked difficult political situations in much
to exchange rate depreciation of the region, opportunistic buyers
against the dollar, which led regional were the most active last year.
buyers to be more cautious in
Lower absorption rates were a
their investment approach.
consequence of the uncertain
In comparison, capital from global business environment during 2018,
sources seeking diversification with prime yields largely remaining
increased 34.0% y/y. In line with a firm, but showing signs of weakness.
strategy to improve the region’sGLOBAL INVESTMENT ATLAS 2019 /35
F I G U R E 1 0 : L AT I N A M E R I CA I N V E ST M E N T VO LU M E S
$6 11.5%
$5 11.0%
$4 10.5%
USD Billions
Prime Yield
$3 10.0%
$2 9.5%
$1 9.0%
$- 8.5%
08Q1
08Q2
08Q3
08Q4
09Q1
09Q2
09Q3
09Q4
10Q1
10Q2
10Q3
10Q4
11Q1
11Q2
11Q3
11Q4
12Q1
12Q2
12Q3
12Q4
13Q1
13Q2
13Q3
13Q4
14Q1
14Q2
14Q3
14Q4
15Q1
15Q2
15Q3
15Q4
16Q1
16Q2
16Q3
16Q4
17Q1
17Q2
17Q3
17Q4
18Q1
18Q2
18Q3
18Q4
Investment Volume Prime Office Yield
Source: Cushman & Wakefield, RCA36 / GLOBAL INVESTMENT ATLAS 2019
REGIONAL TRENDS:
NORTH AMERICA
In contrast to other global regions, However, apartments continued
North America experienced a to take the largest proportion of
volume windfall last year, with investment, at almost a third of all
demand growth from all regions. transactions, while the office sector’s
Although domestic investors stake of investment declined to just
remained the most prolific, 25%, its lowest ever share of trading.
representing 82% of the market, the
Opportunity zones are one
largest increase in demand came
factor attracting more interest as
from continental capital, which
tax changes open up potential.
more than doubled its previous
Increased land sales to date suggest
high. Outside of regional flows,
they will be a growing focus for
French investors were the primary
development activity going forward.
source of global capital targeting
the region, driven by the merger The overall picture for the region
of shopping centre operators was mixed, with the US robust but
Unibail-Rodamco and Westfield. Canada reporting a transaction
decline of -12.0% over the year as
All North American sectors saw
high pricing and supply shortages
increased volumes last year.
took their toll. However, strong
Retail, which had experienced
leasing activity resulted in rent
declines since 2015, found its
increases across prime markets in
feet once more as transactions
North America. Prime yields were
increased by 30.1% y/y.
largely stable, but higher borrowing
costs have led to average cap
rates drifting up in some markets.GLOBAL INVESTMENT ATLAS 2019 /37
F I G U R E 1 1 : N O R T H A M E R I CA I N V E ST M E N T VO LU M E S
$180 8.0%
$160
7.5%
$140
$120 7.0%
USD Billions
$100
Prime Yield
6.5%
$80
$60 6.0%
$40
5.5%
$20
$- 5.0%
08Q1
08Q2
08Q3
08Q4
09Q1
09Q2
09Q3
09Q4
10Q1
10Q2
10Q3
10Q4
11Q1
11Q2
11Q3
11Q4
12Q1
12Q2
12Q3
12Q4
13Q1
13Q2
13Q3
13Q4
14Q1
14Q2
14Q3
14Q4
15Q1
15Q2
15Q3
15Q4
16Q1
16Q2
16Q3
16Q4
17Q1
17Q2
17Q3
17Q4
18Q1
18Q2
18Q3
18Q4
Investment Volume Prime Office Yield
Source: Cushman & Wakefield, RCA38 / GLOBAL INVESTMENT ATLAS 2019
GLOBAL INVESTMENT ATLAS 2019 /39
05 CLIMATE
CHANGE
GLOBAL INVESTMENT ATLAS40 / GLOBAL INVESTMENT ATLAS 2019
05
Having long
CLIMATE
CHANGE
Real estate investors must
now consider the level to
addressing these realities
head on. Inaction risks
languished in the which they are exposed
to both ‘physical’ risk as
developing competitive
disadvantage as reporting
‘important but not well as ‘transitional’ risk,
meaning the risk that comes
standards become either
regulatory necessity or
urgent’ quadrant of from changes to policy and
market expectation. These
market demand driven
standard practice.
real estate investors’ risks may have downside
implications for companies
Furthermore, even if the
to-do lists, 2018 that have not yet taken
appropriate action.
direct impact of these risks
isn’t felt during existing
was the year that Of course, the line between
holding periods, avoiding
addressing these issues
climate change, and addressing climate change
risk and improving the
may lead to liquidity
concerns in the future when
its associated risks, sustainability metrics of
assets can often be blurred,
assets are being sold and
incoming investors consider
finally made the and with the need for all
buildings globally to be
climate risk as part of their
due diligence process.
executive agenda. carbon neutral by 2050
in order for countries to
Investors wishing to pre-
empt the climate risk to
meet their Paris Climate
their portfolios should
Accord commitments, the
A survey of Davos attendees therefore consider:
two are inexorably linked.
published by the World Economic • Asset-level resilience
Forum in January, for example, To date, this has been
to climate change
found that climate-related viewed as a challenge with
related threats
themes made up three of the a time horizon substantially
top five risks perceived most longer than investor • City-level resilience to
likely to materialise in 2019, and holding periods. However, these same threats
four of the five thought likely the creation of bodies
• Their asset management
to cause the most damage. such as the Task Force for
strategy
Climate Related Disclosures
As the incidence of global climate and the rising popularity These factors are already
shocks increases, regulation of GRESB, which in 2018 being considered and acted
and reporting standards are assessed over 79,000 real upon by some forward-
demanding ever more information estate assets worth over looking investors, and
from investors on how they $3trn USD, has reinforced should become a critical
are addressing these risks. that investors can no part of the investment
longer continue to delay approach going forward.GLOBAL INVESTMENT ATLAS 2019 /41
K E Y C L I M AT E CO N S I D E RAT I O N S F O R I N V E STO R S
Management Location Asset
Brand and reputational
Existing and future
upside and downside Shifting occupier demand
physical risk
potential
Shareholder expectations Existing and planned
Physical integrity
and risk government policy
Location resilience and Energy, water, and waste
Addressing transitional risk resources to address risks efficiency
Enhanced asset Migration and socio-
Capex requirements
management economic impact
Impact during the hold Durable vs disposable
period construction
ASSET-LEVEL
CLIMATE RESILIENCE
A N EC E SSA RY uninsurable, as the risk increases in capex
EXPENSE? of providing cover is requirements, as more
considered not worth the severe weather patterns
To date, the view of many
premium This fits with the speed up deterioration of
investors on mitigating
widely held view in the the building envelope.
the effect of climate
insurance industry that
related risk (typically As with any capital
a four degree increase
viewed as mainly natural expenditure, investors will
in global temperatures
disaster risk) has been to want to know the returns
would render insuring
outsource through the for building improvements
against climate change
acquisition of insurance linked to increased asset
related risk impossible.
policies. While clearly resilience to climate risk.
this has been an effective Relying on insurance At this stage, there is
strategy in the short term, also only addresses the no clear data that links
relying on insurance could physical risk to the asset improvements in climate
become more expensive and loss of income. It change resilience with
as insurers improve climate won’t cover the transitional insurance premiums, or
risk modelling through risk of a potential loss of tenant demand. However,
technological advances. liquidity if a lack of climate we expect this to shift in
change resilience causes the future. For occupiers
As policies are typically
buyers to steer clear upon in particular, as companies
renewed annually,
disposal of the asset. develop their own climate
premiums may become
risk resilience strategies,
more volatile as the effects Anecdotal evidence
it will be increasingly
of more frequent natural already suggests this is the
important to occupy
disaster incidents are case, with flood risks for
buildings that are able to
priced in. In the longer example leading to pricing
withstand climate-related
term, it may be possible discounts in some markets.
events in order to minimise
if no action is taken that
It will also not protect potential disruption
certain assets may become
investors from potential to their businesses.42 / GLOBAL INVESTMENT ATLAS 2019
CITY-LEVEL
RESILIENCE
TO O L I M I T I N G In 2011, for example, In Copenhagen meanwhile, while no cities have been
O R N EC E SSA RY Vancouver launched the plans have been announced downgraded yet because
PRUDENCE? Greenest City 2020 Action to build a series of islets of inaction, those that do
Plan, which introduced a off the city’s coast to help may find it difficult to raise
While climate change is
series of targets to make create a flood barrier for capital in the future. This
a global phenomenon,
it the world’s ‘greenest the city, as well as housing would limit their ability
exposure to different
city’. These include: Northern Europe’s largest to continue investing, not
types of climate risk are
waste-to-energy plant, only in climate resilience,
location-specific, including • lowering greenhouse
helping to lower the but also more broadly
everything from high gas emissions to 6%
city’s carbon footprint. into their city’s future
winds to extreme heat below 1990 levels;
While the plan still needs competitiveness.
and fire risk, to rising sea
• creating higher density parliamentary approval, it
levels. While clearly it Investors that have
neighbourhoods to help provides an innovative take
would not be practical assets concentrated in
decrease transportation on how cities can address
for investors to eschew geographical locations
related emissions; and climate related concerns.
assets in locations exposed exposed to climate risk
to climate-related risk, • reducing energy use Ratings agency Moody’s may benefit from working
new mapping tools allow and greenhouse gas statement in 2017 that the with local government to
investors to pinpoint the emissions in existing way cities were managing ensure that these cities
most vulnerable or resilient buildings by 20% climate change was being are taking sufficient action
sub-markets within cities. over 2007 levels. incorporated into their to ensure they remain
credit ratings suggests as attractive places for
However, there is a high They have also introduced
that this risk is being taken capital for years to come.
degree of variability requirements for all new
ever more seriously by the
between cities that are buildings constructed from
finance industry. Investors
working to address these 2020 onward to be carbon
would do well to take note:
risks, the methods they are neutral in operations.
using, and the perceived
efficacy of these tactics.GLOBAL INVESTMENT ATLAS 2019 /43
SUSTAINABILITY
IMPROVEMENTS
W H AT O CC U P I E R S However, achieving buy- certification in Australia, In Europe, BREEAM in-use
WA N T ? in from landlords has long launched in 2005 and now certification is becoming
centred around the premise an implicit requirement increasingly more popular,
With the construction and
that energy efficiency for assets to be lettable, and investors should
operation of real estate
improvements would lead demonstrates the potential carefully consider the risk
estimated to contribute 40%
to decreased running costs power of such tools. In of waning tenant demand
of total greenhouse gas
for the building and a saving the case of NABERS, a for assets that do not meet
emissions globally, designing
for the tenant, justifying a combination of tenant- environmental impact
more environmentally
higher rent. The data around led demand and required benchmarks, rather than
friendly buildings and
this has been mixed, with reporting for certain assets expecting a price premium.
retrofitting existing assets
some studies demonstrating has led to widespread
to improve their energy, The cost of such
a lower running cost for adoption of the certification.
water, and waste systems improvements can also
the asset, while others In other markets, for example
has long been a push for be mitigated through
showing a higher running the UK where buildings
the industry, with BREEAM products such as ‘green
cost, though still more with Energy Performance
and LEED both nearing loans’, as banks begin to
than offset by higher rental Certificates (EPCs) below
their third decade. offer discounts on financing
returns. It is important that an E rating will be unlettable
where the borrower commits
investors view improvements past 2023, uptake may
to delivering environment-
to the resource efficiency initially be regulation-led.
linked improvements to
of assets not only through
the asset. Lloyd’s Bank in
the lens of achieving higher
England, for example, has
rents, but also the potential
introduced a 20bp margin
downside risk of inaction.
discount for such cases, to
While there are not yet promote sustainability.
any global in-use building
‘Green bonds’ are also a
certifications that have
growing option. While a
widespread adoption,
small proportion of the
the example of NABERS
overall public bond market
at less than 2%, annual
green bond issuance is
expected to reach $1trn
USD by 2020, and to date
most issuances have been
oversubscribed. With a large
market of investors looking
to improve the ‘green’ rating
of their portfolios, these offer
landlords a way of financing
such capital expenditure
at an attractive rate.44 / GLOBAL INVESTMENT ATLAS 2019
CLIMATE RISK
MITIGATION
COMPETING
INVESTOR
PRIORITIES
MANAGING SUSTAINABILITY
COST TO MAXIMISE AND WELLBEING
RETURNS IMPROVEMENTS
A BALANCING ACT
CA N YO U R ASS E T the quality of the working It can be challenging to
‘ H AV E I T A L L’ ? environment could strike a balance between
potentially be an ‘easy win’ the potentially competing
While it is now clear that
in terms of attracting talent objectives of improving
climate change must
and increasing productivity. an asset’s health and
be confronted head-on
wellbeing scorecard,
in the current holding Whilst in many instances
mitigating physical climate
period, it is not the only improvements to an asset’s
change risk, and keeping a
new consideration that sustainability credentials
lid on capital expenditure
investors must contend will also lead a better
and running costs.
with when managing both working environment - soft
However, the value being
their existing assets and landscaping can improve
placed on these metrics,
investment strategies. a building’s sustainability
through scorecards such
Health and wellbeing has credentials and has also
as WELL, fitwel, BREEAM
become a much larger been shown to improve
and LEED, as well as the
focus in recent years, mental health, for example
risk of rising insurance
with ample research - there are likely fewer
costs if no action is taken,
demonstrating that the synergies to be found
demonstrate that a balance
work environment has a between protecting against
must be achieved within
direct impact on employee physical climate change
these aims, as there is
health, therefore affecting and creating a healthier
significant downside
absenteeism, productivity, working environment.
risk associated with not
and the like. As occupiers This will inevitably create
taking any action, either
in many markets tension for investors,
through transitional risk
struggle with stagnating alongside the requirement
of government regulation,
productivity and tight to minimise running costs
loss of liquidity, or both.
labour markets, improving to improve returns.GLOBAL INVESTMENT ATLAS 2019 /45
06 OUTLOOK
& STRATEGY
GLOBAL INVESTMENT ATLAS46 / GLOBAL INVESTMENT ATLAS 2019
06 OUTLOOK
& STRATEGY
M AC R O D R I V E R S O F This will impact confidence, At the same time a number
THE MARKET AHEAD: volatility and interest of temporary factors have
rates, and in turn been slowing growth, such
We entered 2019 investment strategy, as
many are questioning
as changes to emission
testing standards in
in a somewhat the degree of risk they
should be accepting.
European car markets and
deleveraging in China. As
chastened position As we’ve moved through
these ease, growth rates
with respect
will benefit. Nonetheless,
the opening quarter the
while this may suggest
news headlines have
to the global
we are not slipping into a
improved somewhat,
global recession, downside
helped by signs of easing
macroeconomic US-China trade tensions.
What is more, while exports
risks are obvious, and it
remains a central view of
backdrop and business indicators
have been negative, with
an increasing number of
economists that we need
with exports, strong employment growth
to plan for slower growth.
manufacturing
and still-low interest rates,
the consumer sector
output, and
is well underpinned
in most markets.
corporate
investment all
lagging behind
expectations.GLOBAL INVESTMENT ATLAS 2019 /47
F I G U R E 1 2 – ECO N O M I C G R OW T H A N D F O R ECAST BY R EG I O N
5.0%
4.5%
4.0%
Expected GDP Growth
3.5%
3.0%
2.5%
2.0%
1.5%
1.0%
0.5%
0.0%
Asia Africa Middle North Western Eastern Latin
Pacific East America Europe Europe America*
2018 2019 2020 *excl. Venezuela
Source: Oxford Economics
The question for investors their investment strategy. currency pressures will be an
of course is: how slow will Increasingly, one investment issue for investors to consider,
that growth be? Depending policy will not suit all possible perhaps differing from 2018 in
on the scenario, the inflation economic outcomes. terms of dollar strength and
and interest rate response therefore hedging costs.
It will also not fit all regions
will vary and this therefore
and as inflation and growth
is a fundamental problem
trends increasingly diverge,
for investors to address in
However, for real estate as for many other investment sectors, the cycle is not necessarily the key factor to
which investors must react. A wide range of structural changes are at play, which are fundamentally altering
the sector. Aside from climate change and sustainability, three key areas are demanding attention:
Geopolitical uncertainty from Likewise, demographic shifts The impact of the sharing
Brexit to Korea continues to hog will continue to influence growth economy is likely to accelerate
the headlines, with one crisis and will be a higher priority for in the short term, with offices
being supplanted by another in investors as they look towards and hospitality leading and a
rapid succession. New policies the appeal of different real push into residential underway
are also surprising the market estate formats such as rented through models such as co-
in some areas and influencing residential, healthcare, and living. Sharing economy
potential at a local level, such student housing. In the shorter services will likely influence
as changes to Sunday trading term though, labour shortages all sectors, and while unlikely
laws in Poland, the introduction will need to be addressed as to be the dominant way
of Opportunity Zones in the these will limit growth and property is used, they will
USA, or efforts to slow the drive increased investment in be an increasingly important
residential market in Singapore. technology across a range of contributor to the flexibility
Considering this, investors will platforms, from AI to battery users need. Undoubtedly, this
need to continue adapting their life. Immigration policies may will add to pressures blurring
strategies and the single most also influence where businesses the lines between sectors, and
effective response continues locate to find their industry’s between the role of landlord
to be diversification by market, future innovators. Tier 2 markets and service provider.
sector, and performance driver. with strong universities and a
In response to this wide range
buoyant start-up culture will
of factors impacting the market,
likely be increasingly targeted,
tech and data driven strategies
particularly since such cities
will be increasingly important to
often offer greater affordability
allow landlords to understand
and a better quality of life,
and react to how their buildings
improving employee retention.
are being used and to support
ongoing innovation.48 / GLOBAL INVESTMENT ATLAS 2019
MARKET
OUTLOOK
T H E M A R K E T FAC E S N O S H O R TAG E O F EQ U I T Y
While new capital raising has slowed, the volumes raised remain substantial and with
the dry powder already held by funds at record levels, there is no sign of any easing
in the demand pressures which have controlled the market for some years now.
Most fundraisings are focussed on North America, but Asia has seen an increased
number of new funds as investors seek out growth stories to lift performance.
On the debt side, bank Some investors are taking a European and Asian
lending is tightening in more relaxed approach to institutions are still
some areas, lenders remain acquisition targeting, with increasing their allocations
risk averse, and quantitative demand spilling over into to real estate, and both
tightening is also set to smaller markets, secondary regions are also likely to
impact. However a shortage assets, and development. see more inbound cross-
of debt is unlikely, at Supply meanwhile shows border demand, notably
least for sensible lending signs of increasing as funds Europe in the short term,
propositions. This will be reach the end of their and Asia in the medium
supported by increased planned lifecycle, and as term as investors follow
sources of non-bank more investors consider the demographic trends.
lending, fintech growth, making tactical sales to
China specifically will
and a relaxation of US adjust their risk profile. In
continue to draw in
banking regulation, not to addition, more stock may
global interest, with more
mention the simple fact flow from the pressured
encouragement for inbound
that lending terms are REIT market particularly
investment from central
attractive at present for as interest rates increase,
government and more
both borrower and lender. as a result of both M&A
opportunities emerging
activity and strategic sales.
While demand is high, as an increasing number
supply remains an issue and Sources of cross-border of Chinese developers
selectivity in investment demand will remain and investors look to
targeting and reluctance to dynamic. Some US trade assets to improve
sell may hold back activity. institutional demand their cash flow. With
However, there are signs may cool domestically deleveraging policies
that both these factors are for example, despite a remaining in place, outflows
starting to ease, which leads possible delay in interest will be slow to recover but
us to forecast a potential rate hikes. Nonetheless, should steadily improve
modest increase in activity North American flows once policy is softened
in some global markets. internationally will remain and as the Go Global
high and foreign interest in China policy moves on.
the USA will also increase
if the dollar edges down.GLOBAL INVESTMENT ATLAS 2019 /49
Global Property Investment by Region
F I G U R E 1 3 – G LO B A L P R O P E R T Y I N V E ST M E N T BY R EG I O N
$2,000
$1,800
$1,600
$1,400
USD Billions
$1,200
$1,000
$800
$600
$400
$200
$0
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
fore
EMEA Asia Pacific Latin America North America
Source: Cushman & Wakefield, RCA
TA B L E 1 – I N V E ST M E N T M A R K E T O U T LO O K BY R EG I O N
Investment Volume Office Yield Change
2019 Forecast Change on 2018 2019
US$ bn 2018 BP change BP Change
EMEA 339.2 2.5% -29 -10
Western Europe 315.1 2.0% -26 -5
Central & Eastern Europe 22.2 10.0% -43 -25
MEA 1.9 5.0% na na
Latin America 2.4 6.0% -73 -30
North America 530.7 -3.0% 5 10
Asia Pacific 874.8 1.0% -22 -8
Global 1,747.1 0.0% -31 -5
Source: Cushman & Wakefield50 / GLOBAL INVESTMENT ATLAS 2019
MARKET
OUTLOOK CONT'D
Y I E L D I N C R E AS E S reduced. The US may face Trends in secondary
D E L AY E D, B U T W H AT modest increases due to markets will be mixed, with
A B O U T R E N TA L the more mature position those perceived to offer
G R OW T H ? of the property cycle, value for occupiers and
but Europe and Asia are investors relative to prime
Assuming, as we do, that likely to see yields remain likely to see compression,
we face slower economic stable or even compress but weaker locations and
growth in 2019, monetary slightly in some markets older stock set to see rents
policy will be looser than where competition is most weaken and yields move
would otherwise be the intense and supply low. out as investors consider
case. As a result, upward their potential capex
yield pressures will be demands going forward.GLOBAL INVESTMENT ATLAS 2019 /51
Occupier trends will be are proving able to and losers are starting to
increasingly important in absorb the new supply, emerge, with an increased
defining performance, and frequently in pre-lettings. emphasis on services,
while business investment experiences, and F&B, with
Multi-family real estate is
may ease in the face of other uses such as fitness
in a similar position, with
macroeconomic volatility, spreading globally. As a
supply increases in some
overall real estate demand result, it is not a universally
markets, most notably in
is likely to remain robust weak outlook and the
the US. Short and medium-
in most sectors and repricing occurring may
term trends are supportive
markets, as quality real be too broad in some key
of growth in a wide range
estate is increasingly markets and formats.
of cities from Madrid,
recognised to be a key
Dublin, Amsterdam, and Logistics vacancies are
ingredient in corporate
Berlin to Vancouver, and at record lows in many
operational success.
other leading Canadian markets and rental growth
With no rising tide of cities, as well as LA and is picking up as a result.
inflation, rental growth sunbelt US markets. Some This is particularly true in
will be limited to the most Asian markets are suffering the US but also globally,
effective and in-demand government interventions, with more pre-leasing and
property solutions – and but areas of short-term a generally restrained level
growth for the best will growth are still evident, of speculative development.
likely be balanced by in select Chinese markets With fit-out costs increasing
real declines in rents for for example as well as as the sophistication of
average or ‘commodity’ more mature markets logistics mounts, obsolesce
space in all sectors, even such as Tokyo, Osaka, threats will grow as will
those such as logistics and Sydney, and Melbourne. demand for longer leases.
student housing which
In the retail market the For hospitality, the tourism
are currently in vogue.
mood is more negative, backdrop is positive and
In the office sector, where but it may nonetheless be an increased number
supply and demand time to rethink strategy. of routes to market are
dynamics look particularly The fundamentals are opening for investors,
appealing in a wide range improving from a consumer including debt. Greater
of global cities, global perspective, but with focus on the operator is
growth hit 3.5% last year. retailers experimenting also emerging, with tech
While it may ease in 2019, and reacting to the growth and data savvy hoteliers
growth of 2.5-3.0% still of e-commerce, demand experimenting with the
looks achievable, given that will remain selective and format and offering more
even markets with rising store rationalisations will exciting potential as a result.
levels of development continue. However winners52 / GLOBAL INVESTMENT ATLAS 2019
STRATEGY
CONSIDERATIONS
Deploying capital safely can be a concern late in the cycle, and interest rates are set to rise.
However, this is natural, as in the battle between protecting against downside risk and seeking
outperformance via management and risk taking, mistakes will often be made.
Move to secondary: At Interesting tier 2 markets Increased flexibility is Change and innovation
this stage in the cycle could include Sao Paulo, being sought by occupiers, will also be seen in terms
many investors will turn Phoenix, Auckland, Osaka, both in terms of space of where and when value
to secondary markets to Glasgow, and Prague usage and leases, and is created along the
find higher returns, but while leading challenger this will generate more supply chain, impacting
this is often a symptom cities are Manchester, demand for solutions everything from who runs
of late-cycle excess and Leipzig, Barcelona, Austin, such as co-working. Users cold storage or interfaces
investors should therefore Atlanta, Calgary, Brisbane, will be seeking this extra with the consumer
proceed with caution. Guangzhou, and Pune. flexibility at little extra (producer or retailer), to
Higher yields are after all total cost, however – control of data centres
Credit markets can
an indication of higher suggesting that the push and the location of click
be appealing: Seeking
risk, not just a potential for greater efficiency and and collect facilities. Data
exposure via lending still
arbitrage gain. This is density will continue. The management and analytics
offers potential, both
particularly the case if we need for flexibility and will be vital in more and
in terms of diversifying
are in an environment of efficiency together make more aspects of delivering
risk and securing higher
restrained growth, as most the case for ongoing and managing real estate.
income returns. However,
commentators assume. experimentation, be that
close attention to the Above all therefore, a need
in property management,
Our analysis suggests regulatory framework is for innovation, creativity,
design, construction,
emphasis should be needed, for example with and new thinking means
or use. Examples may
placed on tier 2 cities and respect to enforceability, that key global tech
include in multi-storey
gateway city submarkets as well as to the risk- markets will remain very
industrial, in multi-sector
in top countries rather adjusted returns offered. much in favour, whether
hoteling, in off-site
than tier 2 or 3 countries Debt is also still accretive in Amsterdam, Berlin,
construction, in bundling
with higher political for investors albeit sensible London, New York,
additional services for
or regulatory risks. In levels of leverage now San Francisco, Boston,
occupiers, and in providing
particular, we believe need to be maintained. Bengaluru, Singapore,
flexible leases that are
challenger cities should Seoul, or Tel Aviv.
Placemaking: As sector not property specific.
be a focus. These are
definitions blur and
cities that may lack the
uses change, mixed-use
scale and liquidity of
assets and locations will
gateways, but do operate
be increasingly favoured
as international hubs and
and forward thinking,
are a magnet for growth
active investors should
due to factors such as
focus on placemaking to
universities, skill clusters,
actually drive users and
quality of life, access,
uses into these settings.
and culture as well as the
increasingly important
factor of affordability.You can also read
