UBS has release its Real Estate and Private Markets’ Real Estate Summary 2018 report. It provides a global overview as well as more focused research on the United States, Europe and APAC region. The research looks closely at the industrial boom and notes that caution has increased despite real estate’s strong underlying fundamentals.
The global overview summary states that real estate capitalization rates and yields are leveling off and rents are growing in most markets. There are multiple risks, including the steady escalation of the U.S.-China trade war. UBS expects advanced economies to slow in 2019 but still remain in growth mode. And new government policies increase the risk of error as central banks withdraw stimulus.
Below is a summary of some of the report’s key findings:
APAC: Economic sentiment is likely to trend lower amidst uncertainty over trade tensions. Commercial property leasing demand is mixed but generally robust. Capital markets are buoyant although activity is centered on a few key cities. The industrial sector still sees value in general but the immediate winners and losers are unclear.
Europe: Take-up and rents continue to rise despite softening fundamentals, while the development pipeline remains muted in most locations. Investment volumes continued to fall in third quarter as caution persists. Yields remain stable in almost all locations.
United States: Major U.S. property sectors are more than two years into a period of income-driven returns with one exception. The industrial sector claimed the highest returns of the major U.S. property sectors in 2018 with more than half of the return coming from capital appreciation. With capital market pressures building, it is likely that returns will settle down somewhat in 2019. Demand is still strong, reflecting positive economic and labor market conditions and should continue to drive income growth in excess of inflation.
