Market Outlook

We are pleased to present our 2022 Global Public Real Estate Outlook Report!

This year, Hazelview celebrated its 10th anniversary investing in public REITs. And what a year it was, with publicly traded REITs rebounding strongly in 2021, experiencing a resurgence in demand, occupancy rates, pricing power and earnings growth. Navigating these evolving fundamentals required us to be flexible and committed to our investment process.

With our exceptional team of professionals based in Canada, the U.S., Europe and Asia providing Hazelview with the local eyes and ears to navigate these unprecedented market conditions, we begin our second decade where we finished our first, by looking for value that others have missed.

For those that received (and recall) our 2021 Outlook, we forecasted total returns of 15-20% for REITs in 2021. Outpacing this forecast, as well as most other industry segments, the REIT-opening in 2021 was in full swing. As for 2022, we believe the potential of sustained inflation will act as a tailwind for real estate valuations and coupled with strengthening fundamentals this will drive attractive earnings growth. Our target total return for global REITs in 2022 is 12-15%.

Segments we believe are exceptionally well positioned to outperform in 2022 include:

• Industrial Facilities in North America
• Data Centers in Asia
• U.S. Residential Sector 
• European Office REITs
• Cell Towers

We look forward to another exciting year, as we seek to deliver the strong risk-adjusted returns our clients have come expect. We hope you enjoy this report and that it inspires conversation. I look forward to connecting soon. 

See you in the new year, 

Corrado Russo
Head of Global Public Real Estate Investments

This article was originally published in  https://www.hazelview.com/

Increased global capital flows and growing optimism to buoy property investments in the region

• Tokyo, Japan is the #1 location to invest in during 2022
• 84% of investors are optimistic about the economic outlook
• The Industrial & Logistics sector has overtaken office as the most in demand asset class
• 74% of investors have already taken action on the environmental performance of their assets

HONG KONG, 9 December 2021 –Leading diversified professional services and investment management company Colliers (NASDAQ and TSX: CIGI) has revealed that quality office assets in major metropolitan markets like London, New York, Tokyo, and Sydney, have retained their allure and will be in high demand next year. Core and core-plus office spaces are the top global strategy picks, with 60% of investors stating these assets as their investment preference, while industrial and logistics (I&L) assets will be the most coveted.

Their appeal not only stems from the realisation that office demand is here to stay, particularly in cities supported by strong transport infrastructure and high amenity values, but also the ease of large-scale capital deployment that office assets represent. The rising cost of construction, viewed by four in five (81%) investors as a pain point, could limit new builds, renovations, and retrofit projects, amplifying the demand for existing quality office assets.

“Based on our 2022 Global Investor Outlook, pent-up demand and delayed transactions will translate into momentum next year. However, investors face an increasingly complex and competitive marketplace, coloured by new regulations and COVID-19 uncertainties. With the amount of dry powder readily available, offices in Tier 1 cities are seen as safe-haven assets that offer an attractive route to deploy capital,” said Tony Horrell, Head of Global Capital Markets at Colliers.

A standout year for Asia Pacific property investments

Across Asia Pacific (APAC), more investors are prepared to put into action their ambitious plans that have been delayed by COVID-19. Cross-border capital flows are also likely to return, as travel and business activity progressively returns.

Terence Tang, Managing Director, Capital Markets & Investment Services | Asia, opined: “Optimism across the Asia Pacific region continues to gather momentum and investors will have a clear appetite to expand their portfolios. Transaction volumes are recovering back to their pre-COVID highs, and asset operating performances remain in a cyclical upswing.”

Overall, I&L assets will be the most sought-after real estate assets in the region, with more than 20% of investors anticipating capital value gains of 10%-20% in value-add I&L assets in 2022, supported by tailwinds and large-scale economic transformation.

Significant interest continues to surround core-plus offices, which remain a popular asset class for regional investors in Tier 1 cities like Singapore, Sydney and Tokyo. 63% of the respondents indicated that they plan to invest in these assets, versus 54% last year.

Multifamily/built-to-rent (BTR) properties are also an increasingly sought-after asset class, with investors targeting both core and development projects. In Japan, this is a sector that is well established and has long attracted foreign core capital, whereas in Australia, it is an emerging asset class with development opportunities.

“BTR is essentially following the development of new infrastructure, which is a strategy we recommend across all asset classes. You need to look at what and where governments are building, the fundamentals of the land and invest in assets you can repurpose if required,” said John Marasco, Managing Director, Capital Markets & Investment Services | Australia & New Zealand.

Retail is for the opportunistic while specialised assets gain favour

Our survey shows that investors see significant potential for the appreciation and repurposing of retail assets. Around a third of the investors mulling retail allocations are targeting opportunistic (including change of use) investments. In addition, hotels are also an opportunistic target, with 38% of investors looking at this sector. Both hotel and retail sectors offer good opportunities in cities with large domestic markets, like Japan, Australia and Korea.

Specialised assets, particularly data centres, life sciences and healthcare, are expected to help boost investment volumes in 2022, with student housing also poised for a comeback as Australia, the region’s main market, opens up to international visitors.

“This interest in alternative assets will continue to grow in most Asian markets, as investors seek new avenues of growth and returns amid the changes brought about by ongoing technological evolution and healthcare needs,” said Tang.

ESG considerations are growing in importance to investors

The report also shows ESG (environmental, social, governance) considerations remain prominent, with nearly three in four investors surveyed globally integrating environmental factors into their strategies. This desire to invest with intent is both a means of future-proofing their assets and responding to stakeholder and societal pressures requiring them to respond to the climate crisis.

ESG has also become a strong focus in APAC, as it will soon be a priority in the office sector as government and corporate tenants pressure owners to get their ratings up.

About the Colliers 2022 Global Investor Outlook

The second edition of Colliers’ annual outlook for global property investors is based on a focused survey undertaken by 300+ investors across the globe and in-depth interviews with Colliers’ regional Capital Markets leaders. The findings and opinions featured in the report are shaped by their responses.

This article was originally published in https://www.colliers.com/en-in

December 6, Singapore – The Asia-Pacific region is set to continue its recovery from the pandemic, despite renewed uncertainty caused by the Omicron variant. Economies that have been hampered by lockdowns in 2021 will likely exhibit above-trend growth next year, according to Knight Frank’s latest report, Asia-Pacific Outlook Report 2022: Optimism and Opportunities Ahead.. 

Christine Li, head of research, Asia-Pacific, said, “The world and the Asia-Pacific region are now better equipped to cope with new variants, as vaccinations and oral medication for COVID-19 continue to gather pace. Although we are witnessing some knee-jerk reactions, over the next 12 months, we still expect most governments to move beyond lockdowns and transition to an endemic stage.”

“A wide range of indicators are pointing towards rebound and recovery in 2022, as Asia-Pacific enters a new cycle of growth driven by low interest rates and high inward investment. With these fundamentals in place, pent-up demand will fuel value growth across the region’s residential and commercial sectors,” Li added.

At a sector level, the report predicts an uplift of 20% in commercial transactions next year and a growth rate of between 3-6% for residential prices. Rents in the logistics sector are forecast to increase 2-3%, while office rents appear to be bottoming out to record more modest growth.

“As COVID-19 restrictions are relaxed, pent-up demand will support a solid recovery across the region. However, the trend will not be linear, and inevitably there will be bumps along the way in the form of new variants, supply disruptions, or ad-hoc restrictions. Fortunately, such setbacks are likely to be temporary and not distract markets from a solid broad-based recovery,” said Kevin Coppel, managing director, Asia-Pacific.

Sector Outlook

Office

• Job growth in the tech sector will continue to be a key driver of office leasing activity
• Co-working will continue to gain momentum from enterprise client demand as corporates adopt longer-term hybrid work strategies
• The region’s office market is expected to remain tenant-favourable, providing a window of opportunity for occupiers to capitalise on for better lease terms

Commenting on the office market, Tim Armstrong, global head for occupier strategy and solutions, said: “We are seeing an increased commitment to hybrid flexible workspaces as a part of occupiers’ strategies as we transition towards a COVID-endemic Asia-Pacific. Occupiers are recognising the impact of flexibility in facilitating employee engagement and cost optimisation.”

Logistics

• Rising transportation costs and the need for more resilient supply chains are driving companies to increase their logistics footprints to house larger inventory buffers
• Rental growth expected to increase by an average of 2-3% as supply for logistics spaces is unlikely to keep up with growing demand
• 13 out of 16 APAC markets tracked are expected to see increasing rents, with Auckland expected to see the highest rental growth.

“The quest to reconfigure supply chain strategies to become more resilient will result in sustained demand for modern logistics facilities, which will keep rents on an upward trend,” noted Armstrong.

Capital Markets

• APAC transaction volume is expected to see an uplift of 20% in 2022
• The office sector could potentially attract more than 60% of inbound investment into the APAC region
• The US and Singapore will continue to be the top sources of capital spend

Neil Brookes, global head of capital markets, said, “Economies forging a path towards the next phase of endemic living will set the stage for a sustained resurgence of cross-border investment into real estate. Competition for assets will remain intense as investors look to deploy record dry powder accumulated, which will keep yields down.

“While core office with long lease expiries and logistics assets will be keenly sought after, we expect activity to turn active across all asset classes as the rotation towards riskier sectors gain traction. There will be ample scope for investors to be creative in the new normal and look towards value-add or opportunistic plays to generate alpha,” Brookes added.

The COVID-19 pandemic, in its protracted state, has put a spotlight on many real estate assets’ strengths and weaknesses, according to the report. Investors are increasingly shunning older assets regardless of geographies and focusing on assets that provide a resilient income stream.

Emily Relf, global head of capital strategies,said, “With yields compressing in Europe to record lows, overseas investors are looking to re-weight their portfolio from low-growth markets in Europe towards higher-growth Asian markets. Assets with strong ESG credentials will attract greater demand. Indeed, Knight Frank research shows a positive premium on sales price for green-rated office buildings in London, Melbourne, and Sydney, indicating that demand for green buildings is a global phenomenon and set to grow.”

Residential

• The unorthodox access to international talent is likely to skew homebuying preferences across Asia-Pacific’s gateway markets in the long-term
• Ease of working from home, health, and wellbeing are essential features in a post-pandemic world
• 18 of 24 APAC cities saw price growth since the beginning of the pandemic and are expected to grow further in 2022

“Residential markets across the Asia-Pacific region could continue to strengthen in 2022 as the region starts to recover in the endemic phase. With more quarantine-free travel lanes reopening, foreign buyers could return to key gateway markets sooner than expected,” said Victoria Garrett, head of residential, Asia-Pacific.

“Now is the best time for domestic buyers to pick up their dream homes, given the potential policy interventions that could hamper purchasing prospects in 2022,” Garrett concluded. 

Active local investors dominate Q3 retail transaction volume as they eye potential capital growth

Retail investment activity has been subdued with only 48 completed deals in 2020 compared to the peak of 110 in 2018. However, with the easing of social-distancing restrictions, activity has picked up especially from veteran investors whose activity accounted for almost all the retail transactions concluded in Q3 2021. Unpacking this data further, our latest Colliers Flash reveals that the next six months could provide good timing for investors to bottom-fish. 

To #SeeWhatCouldBe and how you can capitalise on retail asset investment, read our latest report, or talk to an expert today.

This article was originally published in https://www.colliers.com/en-hk

Read on for the full updates from APREA’s Q3 2021 Advocacy Bulletin, which includes the following items:

China

• The NDRC published a further Notice on 29 June 2021. The Notice includes “affordable rental housing” as an eligible asset class.

Hong Kong

• The FSDC published a paper on “Revitalisation of Hong Kong’s REIT Market” in May 2021.

India

• Strong comeback for REITs
• National Monetisation Pipeline (NMP)
• PFRDA allows pension funds to invest in debt securities of REITs and InvITs
• India’s first Bad Bank a saviour for distressed assets
• RBI notifies to allow FPIs to invest in debt securities of REITs and InvITs

Malaysia

• Malaysia plans major infrastructure projects in H2

Singapore

• Requirements on Climate-Related Disclosures and Board Diversity Policy Proposed for SGX-Listed Companies
• Rental Waiver Framework for SMEs and Specified Non-Profit Organisations Affected During Phase 2 (Heightened Alert)
• Singapore SPACs Listing Framework Takes Effect on 3 September 2021

In the middle of a global pandemic and the related economic crisis, why should we be interested in the state of wealth around the world? More so than ever before, private capital is becoming more crucial in driving economies and real estate markets globally. Global response to the pandemic saw interest rate cuts and governments increase fiscal stimulus to support economies. As a result, the populations of many countries experienced an accelerated growth in assets, increasing the world’s ultra-high net worth population by 2.4%. Last year alone, 32% of global property investments came from private investors, which is 9% above the 10-year average, higher than the 6% fall in the amount committed by institutional investors. At the heart of The Wealth Report is the Attitudes Survey, which captures insights provided by the world’s leading private bankers and wealth advisors. It gives us unique perspectives on the investment and lifestyle decisions taken by Ultra-High-Net-Worth Individuals (UHNWIs). Included is Knight Frank’s proprietary Prime International Residential Index (PIRI), which provides a comprehensive update on the performance of the world’s 100 most important luxury city and second home markets.

Explore our latest global real estate insights – from market dynamics during the previous quarter to asset trends, pricing movement expectations, and upcoming opportunities.

• While various parts of the world are in different stages of re-opening, transaction volumes are up across EMEA, Asia Pacific and North America, signaling a swift rebound in activity and global appetite for real estate.
• High vaccination rates and fewer government restrictions continue to coincide with any activity resurgences and return in confidence, particularly among international investors.
• Industrial remains a top investment choice, multifamily remains a strong sector to watch, and offices are seeing renewed interest.
• Property prices are expected to rise in the second half of the year, led by multi-family, logistics, and specialized assets with low supply but high competition.

Using data to do more with less

Source: Yardi white paper

As investors sharpen their focus on sustainability, how do real estate companies respond? Yardi’s regional director Bernie Devine takes stock.

As the Intergovernmental Panel on Climate Change warns that we are now in the decade of decarbonisation, pressure is mounting for lagging economies and companies to step up, and for leaders to make even larger strides towards net zero emissions.

Seventy per cent of the world’s economies, representing two thirds of global carbon emissions, have made strong commitments to carbon neutrality, says the UN, and a third of the world’s assets are moving towards net zero by 2050 through the Net Zero Asset Owner Alliance.

Meanwhile, the Climate Bonds Initiative has tracked US$1.2 trillion of green bonds, and GRESB has recorded a 22 per cent increase in real estate companies disclosing their environmental, social and governance (ESG) achievements in just one year.

Despite the signals sounding loud and clear, sustainability is “still stuck off to the side of business process and reporting, rather than front and centre,” observes Yardi’s regional director, Bernie Devine.

Devine sees a similar scenario playing out across the Asia Pacific.

“The investment manager receives a query about sustainability and funnels it off to the ESG team to answer. This immediately tells me two things. Firstly, that the investment manager doesn’t know the answer; and secondly that the sustainability team is not central to the investment management process.”

Yardi’s latest whitepaper, Using data to do more with less, outlines five steps for real estate companies to take on the road to sustainability. It includes insights from Goodman Group’s chief financial officer, Nick Vrondas, and co-founder of Seoul-based Reimagining Cities, Chunga Cha.

While the report suggests strategies that real estate companies can adopt to capture the right data for better decision making, Devine warns that many business systems need an entire rethink.

“Spreadsheets won’t solve the sustainability challenge,” he says, noting that 58 per cent of real estate companies across the region remain reliant on Microsoft Excel to manage leasing, sales and property management information.

Much like security-by-design is embedded into software, business processes must be redesigned with sustainability at the core, Devine suggests.

“The real estate sector understands it must put the customer at the centre of its mission. To that I would add, if your objective is customer satisfaction, sustainability is central. The goal must be sustainable customer relationships through sustainable outcomes.”

Yardi helps real estate companies to complete sustainability assessments, manage ESG data and advance ESG performance. Download Yardi’s latest white paper: Using data to do more with less.

This article was first published in Property Council of Australia.

This report provides insights to investors into real estate transactional volumes as well as the emerging trends and opportunities in the Asia Pacific commercial real estate markets. So far, we’ve received very good feedback about the report’s content from our audience.

Some key takeaways of the report:

• APAC real estate investment markets are on an upswing following a progressive recovery in the world’s economies since the beginning of the year
• Transaction volumes across the region surged to new heights in H1 2021, up 28% compared to H1 2020, totalling a new record of USD103 billion
• The industrial and logistics markets across APAC are the fastest-recovering sectors, registering 70% growth year-on-year in H1 2021
• Asset dispositions by the APAC PE funds in the years to follow will bring more investment opportunities for investors
• REITs are garnering investor interest with a recovery in market pricing and potential IPOs on the cards
• Large-scale redevelopment strategies will support buy-side demand ahead

“Despite operating under the shadow of the pandemic, warehouse markets across the region have remained largely stable, driven by sustained demand from the e-commerce sector. Recent events that have impacted commitments to customers have put the development of supply chain resilience into focus and major occupiers are responding by re-configuring their strategies through building out inventory buffers and expanding urban distribution nodes. This will have positive knock-on effects for demand to strengthen for logistics spaces. Developers in the region remain on the hunt for opportunities to capitalise on growth trends, indicating sustained confidence in the region’s warehouse markets.”