Global real estate to attract more investments this year

CAPITAL flows into global real estate is expected to rise by 10 to 15 per cent as investors plan to increase their acquisitions in 2015, said commercial real estate services and investment firm CBRE.

Its Global Investor Intentions Survey 2015 found that 53 per cent of global investors intend to increase purchases this year.

Last year, capital flows rose to US$835 billion, almost four times greater than the US$232 billion in 2009. Europe, Middle East and Africa (EMEA) posted the greatest rise, followed by the Asia-Pacific and the Americas.

Appetite for cross-regional acquisitions rose from 28 per cent in 2014 to 38 per cent in 2015, with more respondents looking to invest outside their own region this year.

Of these, 31 per cent identified Western Europe as the top destination. Asia, North America, central and eastern Europe, the Pacific, South America as well as Africa and the Middle East trailed behind. 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 10.

Second-tier cities also saw increased investor interest in 2015. Madrid, Dallas and Seattle made it to the top 10.

Investors from EMEA and North America are said to be hungry for value-add and opportunistic investments.

In contrast, the survey said Asia-Pacific saw a significant jump in investors preferring prime core assets at 43 per cent in 2015, compared with 29 per cent last year.

Chris Ludeman, global president of CBRE Capital Markets, said 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.

Office and industrial assets remain the preferred asset classes, chosen by 33 per cent and 29 per cent of investors, respectively.

Interest in industrial and logistics assets is being driven by the structural change in the retail sector and the growth of e-commerce, said the report, adding that there is a limited supply of assets in this sector available for sale so investors will continue to face challenges when sourcing deals.

Half of the respondents identified asset pricing as the top obstacle to acquiring real estate assets, followed by availability and competition from other investors.

The ‘new normal’ economic environment of moderate growth, low interest rates and compressing bond yields continue to drive investment in commercial real estate, said Richard Barkham, global chief economist, CBRE.

“We also observe the continuing globalisation of the investment market, reflected by the 40 per cent year-on-year growth in cross-regional capital flows in 2014 – a figure well above the growth rate for the market overall.”

The survey was conducted using an online questionnaire in January 2015. Responses were obtained from more than 700 real estate investors in the Americas, EMEA and Asia-Pacific from a range of investor types including asset managers, property companies and private investors.

Source: Business TImes page 12 7 May 2015.

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