Global real estate investment volumes plateaued last year, decreasing by 0.7% in the 12 months compared to the same period in the year prior.
A strategy needs to evolve in the face of the changes in the market, with a focus on sustainable income but also on targeting appropriate returns, given the varying risk and liquidity of different asset pools.
Below are key takeaways from the following report:
Winning in Growth Cities – Cushman & Wakefield – Report Link
Cushman & Wakefield
- Demand remains strong, but investors are wary of pushing prices or embracing riskier markets given the interest rate and growth environment. Muted economic growth and ongoing headwinds mean the growth side of the equation will remain in doubt in the months ahead.
- The recovery in Q2’19 in the US activity is an indicator of how markets can respond once interest rate uncertainty is reduced.
- Downward pressure on yields will continue in the most liquid markets, and the differentiating factor in markets going forward will be less about growth and more about the relative financing costs and the structural shifts the specific market has embraced.
- Mixed-use is becoming ever more important to provide flexibility and drive growth. The fundamentals are strong in terms of the upside for creating a platform of scale, positive gains to portfolio performance, and the imperative to embrace a wider mix of uses to make property work.
- Climate change needs its own distinct response from investors to include an appreciation of the locations at risk, and the contributions the asset can make to reducing global risk.
- The economic backdrop will be muted and volatile in 2020 with the biggest risk likely to be trade wars. With credit conditions set to remain loose, the cycle has further to run.