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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Houston's Marathon Oil Tower Sold

Hanover Real Estate Partners, based in Greenwich, Connecticut, announced this week that it had sold the Marathon Oil Tower to CBRE Strategic Partners US Value 6, a fund sponsored by CBRE Global Investors. Terms of the deal and purchase price were not disclosed, but the property is appraised at $214 million according to the Harris County Appraisal District. CBRE's brokers Bernard Branca, Jared Chua and Russell Ingrum advised CBRE Global Investors on the acquisition.

"We sought an opportune time to sell this truly unique trophy asset and believe this attractive transaction makes sense for both parties," commented Hanover Real Estate Partners managing partners Reed Miller and Ken Boyle. "We enjoyed working with CBRE Global Investors to consummate this sale and are pleased to come to an agreement that creates immediate value for our investors."

"Houston ranked second in the nation in net absorption in 2012, and the Galleria submarket in particular is experiencing dramatic recovery," Vance Maddocks, president of CBRE Strategic Partners U.S., said in a statement announcing the sale. "Given its location within a major growth corridor, Marathon Oil Tower is a great fit with our fund's strategy, and with our strength of ownership, we will be able to add value for tenants and our investors."

The 1.2 million square-foot, 41-story office building at 5555 San Felipe was 93% leased at the time of sale, with 60% leased to Marathon Oil Corp. Hanover took over responsibility for the management and oversight of the property from Lehman Brothers Inc. in 2003. Hanover announced last July that it had committed $5 million in capital improvements to the property, including fully modernizing the building's 40 elevators, installing card-key access security turnstile system, retrofitting the building's parking garage lighting and making improvements to the asset's cooling tower and drainage system.

For more news and information visit Blumberg Capital Partners.