MIPIM 2013: C&W predicts greater risk appetite in 2013

In a new report, the New York-based real estate services firm anticipates that more buyers will begin to move away from a “safety-first” approach as confidence builds in the global property market.

Following a difficult year in most markets, global real estate investment activity is poised for a significant rebound in 2013, with aggregate volumes expected to exceed $1 trillion for the first time since 2007, up some 14 percent from $929 billion last year, according to Cushman & Wakefield’s latest International Investment Atlas report, which was unveiled at the MIPIM conference today.

“2012 was a year of profound uncertainty in the global economy, which impeded decision-making and market activity,” said Glenn Rufrano, global president & chief executive of Cushman & Wakefield, in a statement.“We anticipate there will be less uncertainty this year and, in fact, a true change in market confidence. Indeed, momentum seems to have been confirmed in the early months of 2013 as major global risk factors are seen to be receding – albeit not yet disappearing.”

Much of the investment activity will be concentrated in the North American and Asian real estate markets, driven by institutions, high-net-worth individuals and family offices with increased allocations to real estate as well as more assets being put on the market.

To date, most investors have adopted a “safety-first” approach, favoring long-term players and trophy assets in gateway cities. However, “there is a growing consensus that we are past the worst for the risk cycle and that 2013 risks are weighted towards the earlier part of the year, which if proven true will support a more marked pick-up in confidence and hence activity later this year,” said David Hutchings, head of Europe, Middle East and Africa research at Cushman & Wakefield.
Hutchings anticipated that “a key theme of the year will be about finding value in second-tier markets as investor yield demand grows and as cost-sensitive occupier interest grows.” Indeed, while the US will remained a targeted market for yield, investors will be required to pursue transactions that carry a greater amount of risk, such as high-quality assets in secondary markets or properties with vacancies in top-tier markets.

In Europe, Cushman & Wakefield also anticipated more buyers going up the risk curve in 2013. That said, the majority of investors in the region still are likely to prefer core markets and strategies, with Germany, the Nordic countries and the cities of London and Paris viewed as safe havens for real estate capital.