London Top Target for Global Investors, Secondary Markets Gain Popularity
According to CBRE's Global Investor Intentions Survey 2015
, global real estate investors remain confident and their intentions are expansionary, with more than half planning to increase their acquisitions in 2015.
Globally, 53 percent of investors plan to increase their purchases this year. Investor appetite for cross-regional acquisitions has increased significantly with 38 percent of respondents intending to invest outside their own region this year-up from 28 percent in 2014. Among these investors, 31 percent identified Western Europe as the top destination. Despite the slowdown in China, 27 percent of investors regarded Asia as their preferred investment destination, with economic growth there still outpacing other regions and continuing to offer significant long-term growth potential.
London retained its position as the top city for investment, while other gateway cities such as Tokyo, Sydney, New York and Paris remained in the top ten. Second-tier cities saw an increase in investor interest in 2015, with Madrid, Dallas and Seattle all making the top ten. This reflects investors' search for more attractive yields, as well as greater knowledge and comfort with a larger number of global cities. There is also a marked increase in appetite among investors from Europe, Middle East and Africa (EMEA) and North America for value-add and opportunistic investments. In contrast, Asia Pacific saw a significant jump in investors preferring prime core assets at 43 percent in 2015, compared to 29 percent last year.
"The appetite for global real estate investment is increasing as more investors intend to deploy capital outside of their own region this year. Competition for assets is intensifying and many investors plan to move out the risk curve in search of higher yields-a trend that will result in a stronger focus on value-add and opportunistic investments. We believe that a low interest rate environment, economic expansion in an increasing number of markets, and corresponding improvement in real estate fundamentals will attract capital to commercial real estate," said Chris Ludeman, Global President, CBRE Capital Markets.
Office and industrial remain the preferred asset classes, selected by 33 percent and 29 percent of investors respectively. Investor interest in industrial and logistics assets is being driven by the structural change in the retail sector and the growth of e-commerce; however, there is a limited supply of assets in this sector available for sale, meaning that investors will continue to face challenges when sourcing deals.
Half of respondents identified asset pricing as the top obstacle to acquiring real estate assets. The tight availability of assets (21 percent) and competition from other investors (19 percent) were also identified as obstacles in all regions.
"The "new normal" economic environment of moderate growth, low interest rates and compressing bond yields continue to drive investment in commercial real estate. We also observe the continuing globalization of the investment market, reflected by the 40 percent y-o-y growth in cross-regional capital flows in 2014-a figure well above the growth rate for the market overall. The survey findings strengthen our view that overall volumes and cross-regional investment will increase in 2015," said Richard Barkham, Global Chief Economist, CBRE.