David Hutchings, Partner and Head of EMEA Investment Strategy, EMEA Capital Markets, Cushman & Wakefield writes...
Our 2014 Investment Atlas, launched at MIPIM today (12 March 2014), revealed a 22.6% rise in global investment activity in 2013 to USD1.18tn. This is just 5% down on the market’s 2007 peak and we are forecasting a 13% rise this year, taking the total to a new high of USD1.33tn. International Investment Atlas
Since the last peak of the market however a lot has changed – with a much less leveraged market for one thing but also one in which Asia is more important, with its global market share up from 22% to 48% for example- and we now have a truly global market both in terms of where the capital is from and where it is going.
What is clear from our research in the Atlas and from the mood of MIPIM however is that while the capital sources are growing more global, the chief target for that capital in 2014 is going to be Europe.
For sure other regions have great opportunities – with core markets such as the USA, Japan and Australia looking attractive as well as faster growing markets such as Mexico, Indonesia, India, and China having clear short and medium term potential. However as quantitative easing is in reined in and political jitters are felt in a range of markets , it is old Europe that investors believe can offer good risk adjusted returns and – importantly – stock as the unwinding of distress continues to bring assets to market.
Some investors are cautious on pricing, others accept a need to take on more risk to deliver higher returns or acknowledge that we are in a world where London and Paris yields are not necassarilly high compared to some other gateway cities competing for global capital.
According to our Atlas, a range of strategies are open to investors anyway, from starting to look at development in core cities led by London, to taking on second tier cities in Germany and the UK or moving up the risk curve in Spain and Italy as well as parts of Central Europe. However there are a number of core Western cities that also shouldn’t be overlooked, including Amsterdam, Dublin, Brussels and Lisbon – and for the long term, Istanbul and, in our view, Moscow also still makes that list. We’d also be less bearish on Paris than some – its a true global city with liquidity, critical mass and plenty of style after all.
So opportunities stand out across the region but critical to most of them – globally as well as in Europe – is the need to judge the occupier market correctly to make the investment work. So another way the market has changed now is that leverage is not the driver of returns, the occupier is – and long may that remain the case if we are to deliver sustainable and effective buildings with sustainable and competitive returns.