Global Real Estate Investors Plan to Increase Acquisitions, Invest Out

CBRE Group, Inc., a 109-year-old global commercial real estate company headquartered in Los Angeles, conducted a survey of over 700 real estate investors in January. The survey was conducted via online questionnaire and gleaned responses from investors worldwide, including institutional investors and banks as well as private, individual investors.

Survey data showed that 53% of investors plan to increase their purchases this year. The percentage of investors planning to acquire real estate outside their own regions increased significantly to 38%, up from 28% in 2014. This may reflect a trend of greater knowledge of and comfort in a larger number of cities around the world. Among those who plan to acquire real estate in other regions, Western Europe ranked first among the desired destinations, followed by Asia, where there is ongoing economic growth with significant potential for the long term. Second-tier cities such as Madrid, Seattle, and Dallas gained more interest among investors and ranked among the top 10 cities that might expect a rise in real estate investments. Tokyo, Sydney, Paris, and New York remained in the top 10, and London retained its position as the top city for investment.

“The appetite for global real estate investment is increasing as more investors intend to deploy capital outside of their own region this year…. We believe that a low interest rate environment, economic expansion in an increasing number of markets, and corresponding improvement in real estate fundamentals will attract capital to commercial real estate,” said Chris Ludeman, Global President, CBRE Capital Markets.

According to Richard Barkham, Global Chief Economist for CBRE, “The ‘new normal’ economic environment of moderate growth, low interest rates, and compressing bond yields continue to drive investment in commercial real estate. We also observe the continuing globalization of the investment market, reflected by the 40% y-o-y [year-over-year] growth in cross-regional capital flows in 2014—a figure well above the growth rate for the market overall. The survey findings strengthen our view that overall volumes and cross-regional investment will increase in 2015.”

Thirty-three percent of survey respondents said they prefer office real estate, with industrial following at a close second, 29% preferring it. According to CBRE’s article about the survey on its website, the interest in commercial real estate is being driven by the structural change in the retail sector and the growth of e-commerce. Competition is tight in all regions for these types of real estate assets, which account for 19% of total real estate on the market. With this tight availability, fully half of survey respondents named pricing as the top obstacle to acquisition of these assets. Many investors, especially in North American and the EMEA countries (Europe, the Middle East, and Africa) plan to take on riskier investments in search of higher yields—“a trend that will result in a stronger focus on value-add and opportunistic investments”, according to Ludeman. In contrast, investors in the Asia Pacific region increasingly prefer prime core assets—43% of Asia Pacific respondents stated that preference, up from just 29% last year.

The greatest number of responses to CBRE’s Global Investor Intentions Survey 2015 came from the Asia Pacific region, followed by the EMEA region and the Americas.

CBRE ranks among the top 10 largest real estate investment managers in all regions. It was the highest-ranked company in the real estate sector in the Fortune 500 in 2014. It has grown and merged with other companies since its founding as Tucker, Lynch & Coldwell immediately following the San Francisco earthquake of 1906—acquiring the London-based Richard Ellis International Limited in 1998 and the real estate arm of Dutch financial company ING in 2011.