Global Investor Report: Real Estate Continues to Appeal

Colliers International released its Global Investor Outlook for 2016, which gathers information from over 600 global investors, and revealed that investor sentiment toward real estate is projected to remain positive globally in the new year. Over half of the respondents said they will increase fund allocations to real estate in 2016, while only 11% plan for a decrease, which is on track for continued growth in 2016.

"Our global analysis in this report gives a unique macro-view, providing a comprehensive look at the health of the economy as well as in-depth views of market sentiment that serve as a useful bellwether for local markets worldwide," said John B. Friedrichsen, Chief Financial Officer at Colliers International, in a press release. "Our report suggests that the days of 'pass the parcel' are over, and long term secure investment in core markets will be the norm. At the other end of the risk spectrum, large volumes of capital already raised will increasingly seek out opportunities in tier-two cities and recovering markets."

Highlights from the report include:

Real estate continues to appeal.
Sentiment toward real estate remains positive, with global transactions set to exceed 2014 levels by year end and nearing pre-financial crisis levels. More than half of the respondents with multi-asset portfolios also said that they would increase their real estate allocations in the next 12 months.

Liquid markets still preferred.
While the “search for yield” has pushed some investors up the risk curve toward secondary assets and more peripheral markets, the most liquid markets (U.S., U.K., Germany, Australia and Japan) and global gateway cities (London, Paris, New York, San Francisco, Tokyo and Sydney) remain the primary target for global cross-border investors over the next 12 months. In entering peripheral, higher-yielding markets, liquidity is being seen as an obstacle.

Hot pricing.
2016 will see a greater emphasis on secure income and asset management to drive performance. For some investors, it’s getting harder to achieve return expectations, particularly in “overcrowded” core markets, which are seen as expensive and fully priced by many. Some fund managers cite a growing misalignment between their client return expectations and what the market offers.

Return of debt.
More investors will use debt to finance acquisitions, suggesting that the equity phase of the cycle is giving way to a debt phase. This is particularly true of Continental Europe, where interest rates are likely to stay low for longer and further QE rounds from the ECB are expected.

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