According to research by Morgan Stanley Capital International, the size of the global professionally managed real estate investment market will soar to a whopping $11.4 trillion in 2021, with investors completing a total of $2.1 trillion in real estate transactions. set a world record.
Thanh Bui, portfolio manager at private real estate investor Clarion Partners, said at a Franklin Templeton webinar on Nov. Allows landlords to pass costs on to tenants in the form of higher rents. ”
Real estate values tend to stabilize or rise over the long term. The Dow Jones U.S. Real Estate Index is designed to track the performance of real estate investment trusts (REITs) and other companies that directly or indirectly invest in real estate through development, management or ownership, including real estate brokers. The index was 7.34% per annum. Total return for the last 10 years.
Addressing rising interest rates and slowing global economic growth forecasts, Neil Cable, head of European real estate investment at Fidelity International, said at the MSCI Real Assets Conference, “The market consensus is that there will be significant headwinds. is in front of you,” he said. He spoke at the MSCI Real Asset Conference on Nov. 3 as he addressed rising interest rates at Fidelity International.[Though] Assets are likely to repricing faster this cycle than in previous cycles due to diversifying risk appetites and an increase in global players across investment markets. ”
Rising interest rates adversely affect equity valuations by lowering future free cash flow output, but a similar effect can affect appraised property values as buyers are unable to finance large purchases. can also be seen in However, when appraised real estate values actually decline as a result of higher financing costs, the real estate capitalization rate actually rises, and the same cash provided by the real estate when viewed as a non-yielding investment Flow becomes more attractive as a return.
“I think we’ll see a lot of consolidation. Given the strength of the currency and the long-term outlook for real estate, this could be a great opportunity for US-based funds to buy European assets, for example.” Yes, Professor of Globalization and Development at the University of Oxford.
Goldin believes demographics are beneficial to long-term real estate investment strategies. Demographic changes impact the commercial and residential real estate markets as they affect tenant behavior.
“We are seeing strong growth in cities around the world because, on average, the age of marriage is 10 years later than the historical average, as fertility rates have declined in developed countries,” Goldin said. I’m here. “I think retirement ages will continue to change and demographics will continue to change in these economies. This will change how we invest and how we invest in the future.”
Similarly, Bui studies demographics extensively to help inform real estate investment strategies, examining “where people are moving before they even know they’re moving.”
One of the major demographic shifts that the business world has responded to is changes in how employees work, with hybrid and work-from-home policies becoming commonplace among employers.
The work-from-home trend is driving office vacancy rates up around the world, but the trend is most pronounced in the U.S. San Francisco office vacancy rates are currently at 25%, according to CBRE. New York City’s market isn’t doing too well 16% of office space is still available, according to Colliers.
Elizabeth Sepp, senior associate in the real estate sector at the Abu Dhabi Investment Authority, said despite these changes in how people work, commercial real estate as an asset class and the cities that existed before the pandemic are nowhere to be seen. I insisted on not going.
“Since the outbreak of the pandemic, the work-from-home trend has been very strong,” said Szep. “What I’ve learned from New York City’s rising rents is that you should never bet on the city.”
The move to hybrid work is not a negative for Class A commercial or amenity-rich properties. Buildings with open roof terraces and green spaces offering concierge services and on-site maintenance remain highly occupied.
But Bui said: A flight to quality is really happening as everyone tries to figure out whether her life is telecommuting or hybrid her office. ”
Class B and C spaces offer potential opportunities for real estate investors, provided the price is right and the project is attractive.
Goldin indicated he believes a lot of construction and renovations are looming, but he raises the question: “Can we turn retail into entertainment venues and offices into residential areas?” Did. he replied. [of] Since buildings cannot be retrofitted, how to recycle some of these stranded assets will be a major focus in the future. ”
Related article
A bright spot in the miserable office sector: Class A buildings
What are the trends in the office real estate market? Check out Blackstone’s Big Buy.
Where to invest in real estate now and where not, according to two CIOs
Tags: Alts, Commercial Real Estate, Elizabeth Szep, Franklin Templeton, Ian Goldin, Kiran Patel, MSCI, Real Estate, Thanh Bui