A preview of the Cushman & Wakefield Global Investment Atlas 2018. It reviews international investment patterns from 2017 and anticipates market performance for the year ahead. The latest iteration of the report, published annually, shows the highest level of real estate investment on record with a total of US$1.62tn compared to US$1.43tn in 2016 and anticipates a further improvement in 2018.
2. 1INVESTMENT ATLAS 2018
Global real estate performed
exceptionally well in 2017 with
volumes up sharply and values
ahead. Yields compressed 12
basis points on average, while
prime rents rose +1.7% and
investment volumes jumped
+13.2% in USD terms, ahead
of even our own above
consensus forecast.
THE MARKET
AHEAD
6.0%
6.2%
6.4%
6.6%
6.8%
7.0%
7.2%
7.4%
7.6%
7.8%
8.0%
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
Figure 1 – Global Investment Volumes by Region
Source: Cushman & Wakefield, RCA
USDBillions
PrimeYield(AllSectors)
EMEA Americas APAC Prime Yield
The balance of supply and demand
point to a further healthy year in
2018. While availability of stock is
low, we forecast a small gain in
global volumes due to development,
an increase in profit taking, and a
release of stock via corporate activity.
3. INVESTMENT ATLAS 2018 2
MARKET HIGHLIGHTS
FOR 2018
TECH IMPACT
genomics, machine learning,
cybersecurity, IOT, renewables
and big data
Will benefit tech hubs, may hit
‘commodity’ CRE markets –
eg those that can only compete
on cost
4. INVESTMENT ATLAS 2018 3
MARKET HIGHLIGHTS
FOR 2018
SHARING ECONOMY
shared spaces are here to stay
and are set to grow more global
and more branded
Investors will want to leverage their
spaces to benefit from this trend,
while also investing in operating
platforms to access the added value
5. 4INVESTMENT ATLAS 2018
MARKET HIGHLIGHTS
FOR 2018
Prime real estate in global cities is
likely to prevail – location matters
as much as ever in the internet age
More specialised and affordable
tier 2 cities will also be in demand
6. 5INVESTMENT ATLAS 2018
MARKET HIGHLIGHTS
FOR 2018
LEVERAGE CITY SUCCESS
the growth a city creates won’t
only be felt in the CBD, the wider
catchment and suburban market
will benefit too
7. 6INVESTMENT ATLAS 2018
MARKET HIGHLIGHTS
FOR 2018
Emerging markets are set to gain
interest – conditions remain varied
so discretion is warranted!
Gateway cities in these less mature
countries are recommended
8. 7INVESTMENT ATLAS 2018
MARKET HIGHLIGHTS
FOR 2018
New segments and styles of
investing in all regions as portfolios
become more diversified
‘ALTERNATIVE’ sectors
are now mainstream.
9. 8INVESTMENT ATLAS 2018
MARKET HIGHLIGHTS
FOR 2018
2017 marked the highest level of real estate
investment on record, surpassing the previous
record in 2015 by upwards of 12%, setting
a new benchmark for global volumes
Prime yields fell globally, and ended
the year 71bps below 2007’s low point
10. 9INVESTMENT ATLAS 2018
Buyer composition was similar
to previous years – private
investors represent 35% of
global volumes while institutional
and cross border investors each
constituted c.21%.
THE
INVESTORS
$-
$20
$40
$60
$80
$100
$120
$140
$160
$180
APAC Europe North America MEA Latin America
USDBillions
Figure 3 – Sources of international Capital
Source: Cushman & Wakefield, RCA. Note rent and yield excluding multifamily
Continental Global
Asian investors claimed 52% of the
global market, the highest share for
any one region on record.
11. 10INVESTMENT ATLAS 2018
The global backdrop largely
surprised to the upside in 2017
with investors choosing to
expand into new horizons as
a consequence.
TARGETS FOR
INVESTMENT
$-
$100
$200
$300
$400
$500
$600
$700
$800
$900
APAC Europe North America MEA Latin America
USDBillions
Figure 4 – Targets of International Capital
Source: Cushman & Wakefield, RCA
Continental Global Domestic
Primary targets of international
capital remained largely the same,
with the US retaining the top spot.
London remained the most sought-
after city, benefitting from a fall
in Sterling.
12. 11INVESTMENT ATLAS 2018
Market preference for
development sites – 42% market
share (+7.7% up on 2016), with
capital originating primarily from
Asian sources.
SECTOR
TRENDS
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
Multifamily Development
Sites
Hotel Industrial Office Retail
Figure 6 – Sector Share of Global Trading
Source: Cushman & Wakefield, RCA
2014 2014 2015 2016 2017
Industrial grew by 29.5%, as investors
were drawn to the segment’s attractive
pricing and growth potential linked to
e-commerce and supply chain
disruption.
14. INVESTMENT ATLAS 2018 13
ALTERNATIVES
ARE MAINSTREAM
Alternative segments saw a mixed performance
in the past 1-2 years, largely reflecting a shortage
of suitable supply: underlining the long term
potential of these markets
Both higher yields and the opportunity to
diversify through exposure to new growth
drivers will increase the attractiveness of
these segments
15. 14INVESTMENT ATLAS 2018
ALTERNATIVES
ARE MAINSTREAM
Exposure
to Economic
Growth
Exposure
to Inflation
Resilience
to Economic
Volatility
Demographics
& Urbanisation
Government
Influence &
Regulations
Technology
and Mobility
Changing
Lifestyles
Student
Housing
(PBSA)
Private
Rented
Sector (PRS)
Senior
Housing and
Healthcare
Hotels
Data
Centres
Car parks
Self-
storage
Table 1 – Drivers of Performance in 2018/19
Source: Cushman & Wakefield, RCA Very Strong Strong Average Limited Variable
16. 15INVESTMENT ATLAS 2018
Asia Pacific experienced the
biggest inward investment
volume growth globally in 2017,
rising by +31.1%.
REGIONAL TRENDS
– ASIA PACIFIC
5.0%
5.5%
6.0%
6.5%
7.0%
7.5%
$-
$50
$100
$150
$200
$250
$300
PrimeYield
USDBillions
Figure 8 – APAC Investment Volumes
Source: Cushman & Wakefield, RCA
Investment Volume Yield (excl. multifamily)
New development will provide
opportunities in 2018, and reforms
and demographic change will prompt
stronger underlying growth, so
increasing investors focus on
the region.
17. 16INVESTMENT ATLAS 2018
Cross border investment in
EMEA grew +7.5%, to represent
51.0% of the market.
REGIONAL TRENDS
– EMEA
5.0%
5.5%
6.0%
6.5%
7.0%
7.5%
8.0%
$-
$20
$40
$60
$80
$100
$120
$140
PrimeYield
USDBillions
Investment Volume Yield (excl. multifamily)
Figure 9 – EMEA Investment Volumes
Source: Cushman & Wakefield, RCA
Although Asian capital into EMEA
grew by +95.0% on the year, North
American investors were the
strongest global players in the
region overall.
The UK was the most targeted
market, with overall volumes closing
the year +3.9% above those
in Germany.
18. 17INVESTMENT ATLAS 2018
Latin America came out of
recession, posting its strongest
economic figures in 3 years
as increases in commodity
prices improved activity
and confidence.
REGIONAL TRENDS
– LATIN AMERICA
9.0%
9.5%
10.0%
10.5%
11.0%
11.5%
$-
$1
$2
$3
$4
$5
$6
PrimeYield
USDBillions
Figure 10 – Latin America Investment Volumes
Source: Cushman & Wakefield, RCA
Investment Volume Yield (excl. multifamily)
Potential in the region is rising once
more as a result, and nowhere more
so perhaps than Brazil.
19. 18INVESTMENT ATLAS 2018
Despite the outperformance
of the US economy last year,
US investment activity fell
by -6.9% y/y.
REGIONAL TRENDS
– NORTH AMERICA
5.0%
5.5%
6.0%
6.5%
7.0%
7.5%
8.0%
$-
$20
$40
$60
$80
$100
$120
$140
$160
$180
PrimeYield
USDBillions
Investment Volume Yield (excl. multifamily)
Figure 11 – North America Investment Volumes
Source: Cushman & Wakefield, RCA
Canadian markets meanwhile grew
at their strongest rate in five years at
+12.0% and demand is set to remain
hot in 2018.
The US meanwhile is shifting into a
higher gear and this bodes well for its
property markets in 2018/19.
However, the market is as ever very
nuanced, and trends differ by sector
and submarket.
20. 19INVESTMENT ATLAS 2018
2018 is interestingly poised,
with real momentum in the
economy on one hand but
a shifting monetary cycle
combined with ongoing
geopolitical risk on the other.
OUTLOOK
& STRATEGY
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
Asia Pacific Africa Middle East North
America
Western
Europe
Eastern
Europe
Latin
America
Figure 12 – Economic Growth & Expectations
Source: Cushman & Wakefield, Oxford Economics
2017 2018 2019
How investors react to this will
shape the direction of supply and
demand for the year ahead.
21. 20INVESTMENT ATLAS 2018
The most compelling reason
for investment in real estate
has become its exposure to
economic growth and as
a hedge against inflation.
OUTLOOK
& STRATEGY
0
200
400
600
800
1000
1200
1400
1600
1800
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
AnnualInvestmentVolumes(US$bn)
North America Latin America Asia Pacific EMEA
Figure 13 – Global Property Investment by Region
Source: Cushman & Wakefield, RCA
Indeed, while we forecast a modest
further compression in yields this
year, rental growth is set to take
over as the main driver of
performance globally for the first
time since 2014.