Cushman & Wakefield unveiled its International Investment Atlas for 2011 to a small but packed room of attendees at MIPIM today, predicting that global real estate investment activity would increase by 5 percent to 10 percent this year, hitting $606 billion.
David Hutchins, head of the firm’s European research group, told the audience that 2011 will see “more upside to balance out the risks and bad news.” Among the positives, investment activity is likely to exceed expectations and rise by 5 percent to 10 percent this year, with core yield levels likely to stabilise in North America and Europe. He also expects polarization to intensify in multi-tiered markets, where occupiers and investors are driving different segments, and secondary assets and markets benefitting from that competition. “Risk will need to be reconsidered and recalibrated,” he added.
Michael Rhydderch, head of capital markets for Europe, then provided his predictions for the Continent. He said the availability of assets improved over the last six month of 2010 and likely will improve further this year. Although there still is little activity on the bank resolution side, he does expect a huge boost to come from banks disposing of loan books. And for investors, debt is becoming more affordable and available, he noted.
Among Europe’s markets, Rhydderch sees Greece, Spain and Portugal continuing to pose macro risks to the Eurozone, but he added that they also offer interesting investment opportunity for those that can stomach the risk. However, his top investment markets are Russia and Turkey, both of which offer strong real growth and attractive equity returns. He noted that, in terms of demand, Moscow offered the largest office market in Europe last year.
In the Asia-Pacific market, John Stinson, head of capital markets for the region, said he sees continued strong sentiment for investment activity and the return of core capital to gateway markets, which have been dominated by private equity firms for the past couple of years. He also believes investment activity will broaden to all property types, except residential, and that the second half of the year will see a broadening of activity to secondary markets such as Indonesia, Malaysia and Thailand.
Stinson’s “Hot Picks” for investment are Singapore and Hong Kong across the property spectrum of office, retail, industrial and hotels, as well as Melbourne, Sydney, Shanghai and Beijing on the office side. What he called “Warm Targets” for this year and next include Shanghai for hotels, tier 2 cities in China for retail and offices in Tokyo, Taipei, Kuala Lumpur and Jakarta.
Last but not least, Greg Vorwaller, global head of capital markets, provided his outlook for the US. He said investment activity will be fuelled by the “cleansing of problem assets” by financial institutions, while pent-up demand and the search for yield among investors will drive activity “beyond gateway cities on the coasts” to inland metropolises like Chicago and Denver.
Among property types, Vorwaller expects industrial assets to be in high demand due to an improving economy and increasing business activity. In addition, demand for office properties will begin to shift from the central business districts to the suburbs, and pricing levels among multifamily assets will level off due to the uncertainty surrounding government-sponsored lenders Fannie Mae and Freddie Mac.
Regardless of the investment or market, Cushman & Wakefield had one last piece of advice: “Beware of wolves in sheep’s clothing.” Vorwaller explained that many assets may present themselves as solid opportunities in prime markets, but they also may be positioned to seek premium pricing. “Don’t get caught up in the opportunity and wind up overpaying,” he advised.