The economic and geopolitical concerns evident in Emerging Trends in Real Estate regional reports published in the last quarter of 2016, are if anything more pronounced in the global report.
It is striking that while concerns around geopolitics are at unprecedented levels in recent times, confidence in the ongoing flows of capital into real estate remain high.
The consensus was that the current macro-environment of geopolitical uncertainty and fragile economic growth is set to remain a strong feature and real estate will remain in risk-off mode. Global cross border investment into real estate is holding up given the chase for yield and real estates position as a safe haven, and there will continue to be a flight to quality by the majority of institutional investors.
‘If protectionism does come through it will take some time to work its way through - many years. It won’t be 2017 phenomena, but the impact will be felt over the next few years.’ Interviewee, Global Emerging Trends in Real Estate 2017
However, the volume of capital seeking a limited supply of ‘core properties’ is forcing investors to consider new strategies, lowering returns or becoming more active in the operations of their assets.
Clearly real estate leaders are thinking carefully about their next steps.
“People were wrong on Brexit and wrong on Trump, but it is also hard to predict the reaction - people got that wrong as well”
“We started to look at it from a deal level. If you are investing in a port, shouldn’t you be investing around that port as well?”
The Emerging Trends in Real Estate series have shown in recent years that what we mean by ‘real estate’ is evolving and becoming harder to define. The boundaries between real estate and infrastructure are becoming increasingly blurred.
There are many differences in the current approaches to infrastructure and real estate investing, but there are clear benefits to understanding the intersection between them. It is not clear whether the marriage of real estate and infrastructure and the emergence of new alternative sectors is a natural evolution of a more mature industry, or simply a response by asset managers to entice capital looking for original investment strategies.
The jury may be out on the driving forces behind these changes, but the direction of travel is evident. We expect to see a continuing expansion of new, alternatives asset classes with specific operational risk and income profiles. And as the list grows longer there will be practical reasons to tap into the synergies between them.