Investors have ample capital and a strong motivation to invest in real estate because of its relatively high income yield. North America is the preferred region for investors, with London, Los Angeles and Sydney the most popular cities in each of the major regions.
Office is the most popular asset sector, with logistics up strongly in 2017 and a very close second.
A survey conducted by CBRE results reveal that the sum total of planned capital expenditure in real estate by investors is $1.7 trillion. The majority of investors indicate that their buying activity will increase or remain the same compared to 2016. Those investors planning to spend more (40 percent) outweigh those planning to spend less (16 percent) by a margin, indicating a continuing positive attitude to real estate as an asset class.
In 2016 investors were reeling from the volatility in world stock markets, now they are seeing equities reach record highs and economic sentiment is positive. 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.
In last year's survey, investors had shifted decisively in favor of core assets and away from secondary and value-added risk classes. That trend has 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 (48%) cite the high price of real estate as the main obstacle to deploying capital. This increased interest in core-plus and opportunistic reflects that issue, but it also shows that investors are slightly more 'risk on' than they were last year.
Los Angeles is the stand-out preference for investors. Dallas/Fort Worth has moved into second place. Washington, D.C. is the biggest mover, entering the top six at fourth position, having not featured last year. Atlanta moves up one place and Seattle is in seventh position, having not made the top tier last year.
London remains the most attractive city for investors. Berlin has moved up two places to become the second most preferred destination. While there is some concern about European elections, so far this does not seem to have dampened appetite for real estate. The survey shows that, despite the uncertainty over Brexit, investors are increasingly interested in the UK.
Sydney is once again the top destination, with Tokyo second by some distance. Australia's cities remain highly popular with 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.