US$1.7 Trillion In ‘Dry Powder’ Available For Global Real Estate Investment In 2017

Stronger economic growth, the availability of debt capital, and a more positive outlook from investors is expected to drive global capital flows in 2017, according to the CBRE Global Investor Intentions Survey 2017.

With the sum total of planned capital expenditure in real estate by investors reaching $1.7 trillion, the survey revealed that investors have ample capital and a strong motivation to invest in real estate because of its relatively high income yield.

North America was ranked as the preferred region for investors, with London, Los Angeles and Sydney the most popular cities in each of the major regions.

Office was the most popular asset sector, with logistics up strongly in 2017 and a very close second.

“This time last year, investors were reeling from the volatility in world stock markets, now they are seeing equities reach record highs and economic sentiment is positive," CBRE Global President of Capital Markets Chris Ludeman said.

"Although there is uncertainty about the direction that economic policy will take, there is also a growing anticipation that changes will unlock growth.

"While there are some clouds on the horizon–emerging market debt looks problematic as does Greece’s financial situation–economic momentum, alongside the yield advantages of property as an asset class, should ensure another year of substantial capital flows into global real estate," he said.

Despite a volatile global political environment and key European elections set to take place in France and Germany, the report said investors were relatively unconcerned about global or local politics, preferring to focus concerns on undefined ‘global economic shocks’ and ‘faster than expected rises in interest rates’.

Investors in 2016 compared to the 2017 data shifted decisively in favour of core assets and away from secondary and value-added risk classes.

That trend partially reversed in 2017 with a fall in demand for core assets and an increased interest in core-plus and opportunistic assets.

Nearly half of investors cited the high price of real estate as the main obstacle to deploying capital. This increased interest in core-plus and opportunistic reflected that issue, but it also showed that investors were slightly more ‘risk on’ than previous years.

In the Americas, Dallas/Fort Worth has moved into second place behind Los Angeles, while Washington, D.C. was the biggest mover, entering the top six at fourth position.

Atlanta moved up one place and Seattle reached sixth position, having not made the top tier last year.

Within EMEA, Berlin moved up two places to become the second most preferred destination behind London.

The survey said there was some concern about European elections, but such concern had not dampened appetite for real estate and despite the uncertainty over Brexit, investors are increasingly interested in the UK.

Australia’s cities remained highly popular with APAC investors because of their liquidity, transparency and positive long-term prospects. Seoul has dropped out of the top six and Hong Kong has moved in.