Global investment ‘to rise 4%’

MIPIM 2016: Global real estate investment is likely to rise by 4% in 2016, defying expectations of a slowdown, according to the latest research from Cushman & Wakefield.

The research, contained within the Atlas Outlook 2016 report, states that new sources of capital, unsatisfied demand and a strong supply of debt will drive the market through the year and reverse a trend towards slower activity in 2015.

In some markets, regional fluctuations in currencies may push more capital towards the US, but overall the EMEA region is expected to see an increase in trading of between 5% and 10%  and a fall of 30bps in yields across all property.

Report author David Hutchings, Cushman & Wakefield’s head of EMEA investment, said: “The strategy focus for the year ahead should be assets that work for the occupier, not the banker. Productivity is key in what is now an asset, not a sector, pick. Investors are likely to focus on accessing the best local intelligence, resulting in more joint ventures and M&A activity.

“There will be certain common strategic themes to follow, including the potential for ‘build to core’ in gateway markets, providing modern flexible retail, office and residential space, and feeding demand for modern, urban-based logistics.”

Following a year in which trading activity fell off, Asia is expected to return to positive territory. A lack of stock in Japan and Australia may curtail some activity but other markets should report modest growth, with core Chinese cities such as Shanghai seeing the most activity, according to C&W.

North America will turn in more investment activity, driven by a rising dollar and an expanding economy in the US. The cities most likely to benefit will be Chicago, Los Angeles and Boston.

In Canada, subdued oil markets will hold back strong growth, but the core cities of Toronto and Vancouver will continue to post buoyant activity in 2016, according to C&W.

Carlo Barel di Sant’Albano, chief executive of Cushman & Wakefield’s global capital markets and investor services business, said: “Geopolitical issues, the length of the recovery cycle, volatility and increased uncertainty are leading to differing views with respect to asset allocation and how best to invest. This is benefiting real estate as allocations to the sector increase, boosting demand for assets.

“In this economic environment there is also an increasing number of willing sellers aiming to crystallise returns. We therefore forecast a 4% increase in trading this year, which could easily be bettered if current global volatility levels stabilise or decline.

“Performance is yet to peak, with yields not yet at their floor and a slow improvement in occupational demand pushing rents slowly ahead. The short-term cycle favours offices, with growth in prime rents of 4%-5% forecast across major US gateway cities such as New York, San Francisco, Los Angeles and Boston. Elsewhere, similar gains are expected in London, Dublin, Stockholm, Madrid, Sydney, Shanghai and Tokyo.”

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