The report analyzes transaction volume, credit availability and asset pricing and identifies opportunities in the Americas, Asia and Europe, global real estate investment, development and property manager Hines said last month in “2023: Navigating Through the Labyrinth”. He released his global outlook titled. After a turbulent 2022, opportunities abound this year due to revaluations, continued outperformance of high-quality office assets and deflation in some key sectors.
“In a period of global economic discord, transaction volumes will be unlocked with credit availability and a reset of pricing levels in line with expected fundamentals,” said David Steinbach, Global Chief Investment Officer. Successful acquisitions and growth in the new year We will also focus on high-quality assets that meet customer demands for simplicity and flexibility. We expect more incremental opportunities to emerge in 2023.”
Taking a look at the global trends, the report reveals that most of the industrial and rental residential markets continued to have solid fundamentals. Retail fundamentals saw recovery from losses due to the lockdown, but high inflation in many markets is curtailing discretionary spending and impeding a sustained recovery. While short-term rates are expected to decline and long-term rates to remain stable, the report outlines some key areas that investors may be tempted to pivot strategies to, including improving transaction volumes, The increased availability and cost-averaging reductions of traditional credit are included. (i.e., patiently deploying capital during market disruptions).
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Using proprietary research tools to analyze market data, the report provides sector insights for the Americas, Asia and Europe and suggests how real estate investment strategies should be developed this year:
Investors are still rebalancing their portfolios as they have seen declines in both the equity and fixed-income sides of their balance sheets. Tenants are reviewing their development plans for the coming year and have held off on new activity, however, opportunities are expected to open during the second half of the year, including:
• Industrials: Industrial fundamentals are still strong in most markets, but demand will fall if discretionary consumer spending is negatively affected by the recession. The most interesting opportunities are in high barrier markets where the yield premium to acquisition value is substantial.
• Office: Continued vigilance is necessary as the full impact of hybrid schedules has not been fully absorbed. The flight of quality will be evident in the new development performance in the form of better designed, modern, durable products.
• Livability: Careful submarket selection is paramount, as some markets are oversupplied, and affordability ratios are high. Secondary and tertiary markets can provide huge opportunities arising from migration trends, and there continues to be a demand for larger units, active green spaces and single-family rentals.
• Retail: Compelling opportunities are emerging for retail redevelopment dated to the highest and best uses such as grocery-anchored, lifestyle and open-air service-oriented retail offerings and last-mile logistics.
Against the backdrop of this year’s macro-economic and political headlines, a rebalancing of real estate product types has gone a long way. Trends have indicated that there may be further convergence in core sectors of the real estate industry. Opportunities exist in:
• Industrial: Demand for logistics space remains strong to meet e-commerce demand, and as Asia’s economies continue to prosper, there is a need for more cold-storage facilities.
• Office: High-value locations have seen strong growth in properties. While Asia has not been hit as hard by working from home or hybrid schedules, attracting new tenants to office space will require a new creative dimension of user experience.
• Livability: rental demand continues to rise in markets where homes have become increasingly unaffordable; This includes developed markets such as Australia, Korea and Japan.
• Retail: The returns on retail properties have been attractive as compared to other property sectors. The increased stability in retail fundamentals will continue as vacancies and rents have remained stable or are moving in the right direction.
• Emerging Sectors: Sectors such as life sciences are becoming institutionalised, suggesting higher income yield and growth potential.
The ‘bed and shade revolution’ of recent years has come to the fore as we look to strategies for 2023. There is no longer an exceptional winning field. Our ability to understand the nuances of quality within a product type has become more important than simply choosing the right generic bucket. Opportunities will include:
• Industrial: As capital demand normalizes, the focus is expected to shift to individual property and location quality.
• Offices: The future of the office debate continues to focus on a flight to quality – with occupiers seeking a way to net zero. This means there is a smaller pool of viable assets, yet key buildings given ESG must be given attention to outperform older assets.
• Living: Mainstream housing is losing its attractiveness as yields tighten and regulation (eg, Ireland, Netherlands, Germany) restricts rental growth. However, niche product types such as senior living, student housing and serviced apartments retain their appeal.
• Retail: The sector is performing better than expected. Negative sentiment has led to attractive pricing; However, new economic headwinds and uncertainty will delay a rapid return to the sector as consumer confidence continues to return.
Hines is a global real estate investment, development and asset manager. The firm was founded in 1957 by Gerald D. Hines and now operates in 28 countries. It manages a $92.3 billion portfolio of high-performing properties across residential, logistics, retail, office and mixed-use strategies. Its local teams serve 634 properties totaling more than 225 million square feet globally. It is committed to a net zero carbon target by 2040 without buying offsets.
To learn more, visit hines.com and follow @Hines on social media.
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