Real Estate Investor Magazine South Africa June 2016 | Page 15

WEALTH STRATERGIES

A

ccording to Colliers International, 2016
is the year of real estate. On the release of
Colliers Global Investor Outlook 2016,
John B. Friedrichsen, CFO of Colliers International,
reiterated that long-term secure investments in core
markets will be the norm and that “large volumes
of capital already raised will increasingly seek out
opportunities in tier-two cities and in recovering
markets.” According to the report there are six
key themes that will shape commercial real estate
throughout 2016.

Real estate continues to grow its appeal:

Sentiment towards real estate remains positive.
More than half of the respondents with multi-asset
portfolios said that they would increase their real
estate allocations in the next 12 months.
Liquid markets still preferred: Global gateway
cities (London, Paris, New York, San Francisco,
Tokyo and Sydney) remain the primary target for
global cross-border investors over the next 12 months.
These markets have the advantage of offering large
lot sizes and volume of stock that appeal to global
mandates.
Seeking value: 2016 will see a greater emphasis
on secure income and asset management to drive
performance. For some investors ‘overcrowded’ core
markets are being seen for longer-term investments
rather than short term trading.
Risk appetite moderated: International
investors remain confident. While economic volatility
and geopolitical events may have a short-term impact,
long-term strategies remain driven by market
fundamentals.
Local partnering: More global investors will
partner with local expertise and acquire platforms as
a means of placing substantial amounts of capital with
confidence.
Return of debt: More investors will use debt to
finance their acquisitions, despite increased interest
rates in some territories. This suggests that the equity
phase of the cycle is giving way to the debt phase.

International Property Markets in 2016
The Americas

Most investors across the Americas have a very
positive view on the continuing environment for
property investment. Seven years after the global
financial crisis, countries across the Americas are now
at different stages of the next cycle.
www.reimag.co.za

Canada, as well as several South American nations
with deep exposure to the oil and commodities
markets, are feeling the knock-on effects of challenges
in those sectors with South America seeking to come
out of two years of languid investment. In the United
States most investors see at least one to two more
years of affirmative economic activity overall with
positive property fundamentals and strengthening
rents, declining vacancy and minimal speculative
construction in most markets. Investors of the highest
caliber are finding themselves in bidding wars for the
best properties across property types; compressing
yields to record levels in key gateway markets, so
cautious investors must remind themselves not to
overpay for yield.

Asia-Pacific

With investor confidence remaining high and the
majority of investors looking to continue to expand
their portfolios, investment volumes in Asia-Pacific
are likely to continue to increase throughout 2016,
a thought shared by a majority of investors from the
region. Increasingly they will be using higher levels of
debt to fund their acquisitions.
Asian investors are likely to continue to search
for higher-yield real estate developments due to
favourable fundamentals and the availability of
capital. The focus is predicted to be on the buoyant
office sector in China and Hong Kong as investors
continue to chase quality office properties.
Despite high confidence levels, there is an element
of caution that is starting to emerge. There has been
a significant change in attitudes to risk over the past
12 months and this is likely to impact on the types of
properties sought after in the region.

Europe

Despite ‘full pricing’ in several European markets,
international and domestic investors remain
undeterred. Despite survey results that suggest that
the UK remains the key European target, improving
occupier markets and rental growth in Continental
Europe suggests that it may see a further boost in
investment volumes.
While a political solution to Europe’s immigration
crisis remains unresolved, the fact that Germany has
already begun taking in a large number of refugees
could well act as a stimulus to its economy and its
real estate market. Vacant commercial buildings
have been brought into use for temporary refugee
hostels and sheer numbers will drive demand in the
affordable rented housing sector.
JUNE 2016 SA Real Estate Investor

13