Global real estate ‘dry powder’ has hit $1.7 trillion driven by stronger economic growth, greater debt availability and growing investor confidence, said the CBRE Global Investor Intentions Survey 2017.
The annual survey – of more than 2,000 fund managers, insurance companies, pension funds and sovereign wealth funds – revealed that investors have ample capital and a strong motivation to invest in real estate because of its relatively high income yield.
The majority of investors polled indicated that their buying activity will increase or remain the same compared to 2016. Those investors planning to spend more (40 percent) outweigh those planning to spend less (16 percent) by a margin.
“This time last year, investors were reeling from the volatility in world stock markets, now they are seeing equities reach record highs and economic sentiment is positive. Although there is uncertainty about the direction that economic policy will take, there is also a growing anticipation that changes will unlock growth,” commented Chris Ludeman, global president, Capital Markets, CBRE.
“While there are some clouds on the horizon–emerging market debt looks problematic as does Greece’s financial situation–economic momentum, alongside the yield advantages of property as an asset class, should ensure another year of substantial capital flows into global real estate.”
Politics did not feature highly on the list of investor concerns, despite a volatile global political environment and key European elections set to take place in France and Germany. Investors’ main concerns include an undefined ‘global economic shock’ (22 percent) and ‘faster than expected rises in interest rates’ (21 percent).
Nearly half of investors surveyed (48 percent) cited the high price of real estate as the main obstacle to deploying capital, resulting in a fall in demand for core assets and an increased interest in core-plus and opportunistic assets.
Office remains the preferred sector for investors (26 percent), but multifamily (21 percent) and logistics (22 percent) were hot on its heels among investors. The preference for retail has dropped sharply from last year (21 percent to 12 percent).
Los Angeles is the stand-out preference for investors, while other cities which are garnering the most attention in the US are Dallas/Fort Worth, which has moved into second place, and Washington, DC which entered the top six at fourth position, having not featured last year.
Within EMEA, London remains the most attractive city for investors but Berlin has moved up two places to become the second most preferred destination. In APAC, Sydney is once again the top destination, with Tokyo second by some distance. Seoul has dropped out of the top six and Hong Kong has moved in to the top six.