Beijing, 2 February, 2012 -- Macro-economic and political landscape uncertainty suggests that a cautious outlook for commercial real estate is likely to persist into 2012 according to a new report from CBRE Global Research. The Global ViewPoint for 2012 notes that high quality real estate assets in prime locations should continue to perform well compared to secondary real estate and very competitive with regard to other asset classes.
“With the level of uncertainty today, it is inevitable that the outlook for real estate will in many ways be equally unclear,” said Raymond Torto, CBRE’s Global Chief Economist. “It is important to note, however, that the perception of the inflation-hedging capabilities of core real estate holds considerable appeal to investors and commercial real estate will offer competitive risk-adjusted returns relative to many other asset classes in 2012.”
The CBRE Global ViewPoint analysis anticipates that occupiers in 2012 will continue to exercise caution in their decisions, and demand for space will remain moderate. Investors in Europe and Unites States will therefore tend to adopt more defensive strategies, focusing on high quality buildings in prime locations within the most liquid and transparent markets.
A lack of new construction in many markets globally will also boost the performance of existing prime properties.
“Current supply shortages in many of today’s core markets have positive long-term implications for supply/demand balance, even in sub-normal economic growth periods,” added Dr. Torto.
The report notes that value-add investment strategies are more directly dependent on the economy’s growth or recovery, and are therefore likely to be less popular in this environment. As a result, secondary property will continue to underperform from an investment point of view.
Previously, the stronger economic prospects for Asia meant that investors there have been more aggressive. But the CBRE analysis finds that with economic growth starting to slow in China—and concerns about the global impact of the economic slowdown in Europe and slow growth in the U.S.--occupiers and investors are also becoming more cautious in many markets across Asia.
On mainland China market, Dr. Nick Axford, CBRE’s Head of Asia Pacific Research, commented, “We have seen clear reaction to the Central Government’s policies in the residential market. However, on the commercial side, despite a slow down in the economy, the market continues to show resilience as GDP growth remains positive. Globally there is caution in the market and Asia is not immune from this, but local and international investors are still looking at Mainland China for its long-term potential and will continue to place capital on the right property at the right price. ”
“We do see attractive investment options in second- and third-tier Chinese cities as less captial is required and supply is usually more readily available. However, when investment sentiment does become more cautious investors tend to retreat to more established locations,” added Dr Axford.
About CBRE Group, Inc.
CBRE Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services firm (in terms of 2010 revenue). The Company has approximately 31,000 employees (excluding affiliates), and serves real estate owners, investors and occupiers through more than 300 offices (excluding affiliates) worldwide. CBRE offers strategic advice and execution for property sales and leasing; corporate services; property, facilities and project management; mortgage banking; appraisal and valuation; development services; investment management; and research and consulting. Please visit our Web site at www.cbre.com.
About CBRE Group, Inc.
CBRE Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (in terms of 2014 revenue). The Company has more than 70,000 employees (excluding affiliates), and serves real estate owners, investors and occupiers through more than 400 offices (excluding affiliates) worldwide. CBRE offers strategic advice and execution for property sales and leasing; corporate services; property, facilities and project management; mortgage banking; appraisal and valuation; development services; investment management; and research and consulting. Please visit our website at www.cbre.com.
