Global real estate and infrastructure markets look healthy in early 2019, if perhaps a bit expensive, according to BlackRock’s new Global Real Assets Outlook 2019 report. “Mid-cycle fundamentals, with late-cycle pricing,” according to the report. As investors face tighter financial conditions and a more uncertain macroeconomic environment, they are increasingly seeking exposure to real assets for stable yields, diversification and growth potential. However, in a late-cycle scenario, building resilient portfolios should be front-of-mind for investors.
Highlights of the report include:
- Increased competition for investments globally — Real assets capital markets are functioning well, and investment volumes remain robust by historical standards. New capital formation was at or near record levels in 2018, and BlackRock’s latest annual survey of investor intentions suggests this trend will persist in 2019. With capital raising outpacing investment volume, dry powder is mounting and competition for investments remains strong.
- Real assets are becoming an increasingly international asset class — The majority of investment activity is still conducted within domestic markets, but an increasing amount of capital is flowing globally.
- Building a resilient portfolio should be front of mind — Whether that is through securing cash flow, aligning investments to long-term structural trends, or integrating environmental, social and governance considerations into investment underwriting and monitoring.
- Real estate: BlackRock believes the technological disruption of retail and other sectors has a long way to run. In North America, corporate relocations offer signals on second-tier cities. In Europe, BlackRock sees a muddling-through scenario for Brexit and selected value-add opportunities in supply-constrained markets. In Asia Pacific, BlackRock sees durable growth and demographic tailwinds.
- Infrastructure: BlackRock believes the global power and energy transition will continue to be the single biggest driver of global deal flow. In North America, corporate appetite for renewable power expands, while in Europe, renewables auctions are compressing prices. Asia Pacific and Latin America hold promise as key growth markets.