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Real Estate

Let’s make a deal

by Andrea Waitrovich

The aging global population will drive real estate transaction volumes to surpass $1 trillion worldwide by 2020, up from $700 billion in 2015, according to a new report released by JLL. Institutions also are set to increase their market share, which currently sits at 20 percent, driven by the need to cater to the investment requirements of the aging population.

Of major influence on this trend will be cross-border investors, with international activity expected to exceed 50 percent of all investment activity by 2020, growing to more than $500 billion annually, with the biggest increase coming from capital moving between the regions.

“By 2050 there will be more people over the age of 55 than the entire population of the world in 1950,” said David Green-Morgan, global capital markets research director with JLL, in a statement. “This demographic impact will have a profound effect on real estate investment strategies, with the amount of private equity capital targeting direct real estate set to increase by more than 500 percent. Much of this will be driven by increasing institutional allocations looking at higher-yielding opportunities.”

Real estate investment markets have witnessed several new trends during the past 10 years as the sector has become truly global, helped by real estate’s stable income stream and the attraction of diversified portfolios, lower risk and a hedge against inflation.

In addition, the definition of mainstream real estate investment has widened considerably beyond office, industrial and retail properties and now includes healthcare, senior housing, student housing, residential development, public and private real estate debt, and the establishment of a multifamily sector outside of the United States.

“We anticipate that in the absence of significant new stock becoming available, capital will target many different avenues to achieve its desired direct real estate exposure, including joint ventures, partnerships, M&A and other alternative sectors, such as healthcare, retirement living and, increasingly, residential,” added Green-Morgan.

The alternative real estate sector has emerged as a bright spot of activity and opportunity in an investment landscape beset by low yields and volatile returns. Allocations have grown rapidly, with 2015 seeing a record-breaking $21 billion in transactions in the United Kingdom alone — representing about 25 percent of all commercial real estate investment, up from less than 10 percent five years ago.

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