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Hike in Investment activity expected in H2 to give strong finish to 2012
15 Mar, 2012, France
Cushman & Wakefield’s Global Property Investment Outlook
‘Despite the currently cautious mood in most global property investment markets, a stronger second half of the year is expected with a potential 20% hike in activity levels forecast, driven by increased confidence and a release of pent-up investor and tenant demand.’ according to Cushman & Wakefield’s latest research, the International Investment Atlas 2012, released today.
Glenn Rufrano, Global President & CEO of Cushman & Wakefield said: “We are witnessing increased risk tolerance in the securities and real estate markets. As the economic news firms, particularly in the sovereign debt and banking markets, these trends are expected to accelerate in the second half of the year.”
Cushman & Wakefield anticipate volumes for the year to be little changed overall on 2011, at US$710-720bn, (US$805-815bn including multifamily) but within this total, a potential 20% increase between the first and second halves of the year is expected, with activity picking up due to stronger demand as well as increased investment supply resulting from bank loan sales and recapitalizations.
Global Commercial Property Investment Volumes (excluding multifamily)
Source: Cushman & Wakefield, RCA, KTI and Property Data
“A return of better economic growth is key to the strength of the recovery but the most crucial point for the timing of that recovery will be the confidence in growth rather than the growth itself” commented Greg Vorwaller, head of global Capital Markets at Cushman & Wakefield. “Sustained job growth will be a vital boost to absorption but ahead of that, a rally in sentiment should be enough to trigger a steady release of pent up occupier demand for effective, modern space as stalled business plans are put back into action, helping investment, banking and development markets. However even if confidence stays low or a new crisis emerges, property is still going to remain high on the agenda even as tenant demand falls– for investors as they look for secure incomes and for occupiers as they look to cut costs and utilize their asset base to its fullest extent.”
Potential growth and changes in occupier demand are a particularly dynamic area of the market, with tenants seeking space to better meet their business objectives not just to house more staff. Demand is emerging to tackle new markets and to cut occupational costs but also to address changing structural issues such as energy costs, sustainability, technological change, demographic and working practice changes and of course e-commerce
Regional investment opportunities:
With investors seeking security and liquidity, gateway cities will be in strong demand in all areas of the globe according to the report.
David Hutchings, Head of European Research, Cushman & Wakefield, said, “London will continue to stand out due to the sheer depth of its market as well as the long term growth it offers but despite it being an Olympic year, it may have to put up with a silver medal for investment, with New York likely to again take gold, benefitting as it does from not just scale but also pent up recovery potential which will be released at some point.”
Investors are also set to look more widely for opportunities this year, some taking on more risk, other re-evaluating what risks they are ready to face. In fact a new hierarchy of targets is starting to emerge as investors look beyond the region or country that a market lies in to better understand its true risks and growth potential.
Global Commercial Property Investment by Region (ex-multifamily)
Source: Cushman & Wakefield, RCA, KTI and Property Data
Asia Pacific – strong interest to continue with renewed activity in emerging markets in H2.
Last year Asia saw a 42% increase in industrial investment and a 26% rise for retail, with no significant change for offices or hotels. These trends will continue in 2012 with a focus on Japan, Hong Kong and Singapore for industrial, mainly in logistics. In retail, Cushman & Wakefield expect to see continuing interest throughout China as well as the gateway capitals of Singapore and Hong Kong but capital will also take advantage of the growth in Seoul of sophisticated modern retail centres which have been in very short supply.
John Stinson, Head of Asia Pacific Capital Markets, Cushman & Wakefield, said, “While we expect the first half of 2012 to continue last year's trend of a move back to core product in gateway markets, from mid year on we anticipate an increase in activity in the emerging markets. Strong local conditions, unprecedented numbers of opportunities and favourable investor sentiment will see more international capital deployed in India for example, initially in residential and then in office products in Bangalore and around NCR.
In China, the global investor community is now differentiating and seeing markets within markets, with the key cities of Shanghai and Beijing being the pick for office exposure. Strong turnover will continue to drive excellent fundamentals for investment in mid to high end retail malls in either high street Tier 1 locations or strong Tier 2 cities such as Chengdu.”
The America’s set to lead the recovery
Commenting on the America’s, Greg Vorwaller, Global Head, Capital Markets, Cushman & Wakefield, said “The Americas look likely to see the fastest growth in investment activity again this year, focussed on the US. However for those willing to look behind the headlines, Mexico presents some compelling opportunities in prime retail, office and industrial for premium risk adjusted yields. The industrial sector in particular should benefit from the on-shoring and near-shoring of manufacturing. Brazil remains a place where truly global investors must take a position given the relative growth of the economy and absolute growth of its middle class. Industrial and retail continue to offer attractive opportunities for those seeking stable growth with capital appreciation in mind, providing tax and currency risks are accounted for.
In the US, beyond prime assets in prime markets, investors should begin to focus on prime assets in secondary cities that have historically performed well on a supply/demand basis through economic cycles. Also, they will continue to pursue well located industrial and retail properties, extending the rally that began in these sectors in 2011. Lastly, in view of the growing book for loan maturities, recapitalizations of well positioned but over-levered properties could provide investors with solid current returns, plus upside.”
EMEA – choice of markets widens for low risk investors in 2012
Michael Rhydderch, Head of EMEA Capital Markets, Cushman & Wakefield, said, “In Europe, low risk investors will continue to have a wider choice of markets than they realise with the focus on Germany and the Nordics, particularly for retail. France and the UK are perhaps a little riskier now – with slower economic growth and more recent property price appreciation – but they offer good medium term growth and higher return potential in development and refurbishment in London and Paris.”
He continued: “Elsewhere, Poland is an easy pick to make but a crowded market to buy in and one that really has to be seen as more core than value-add these days. Indeed, for those seeking higher returns, they will need to look towards the fringe – with Russia a very exciting market at present and Turkey set to perform well – or towards what are currently less favoured segments of the market. In particular investors need to look at where distress is likely to emerge but can be married with attractive long term fundamentals – be that from repositioning retail space in a range of markets, from an undersupply of modern retail or offices in some Italian cities or a shortage of modern logistics to rent in Spain and Portugal.”
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