In my opening remarks at our VIP – Americas conferences, I always try to recap some of the recurring themes we are picking up during discussions at our Editorial Advisory Board meetings around the world. The following is a recap of this year’s themes.
From the Current Issue
An important principle in finance is arbitrage, the tendency for capital to flow in the direction of higher risk-adjusted returns so that in equilibrium, when the flows stop, expected risk-adjusted returns are the same across all assets, including U.S. Treasuries, core real estate and development.
Every dog — and property type — has its day. This day belongs to the industrial sector. Not only was industrial the top-performing property type of 2014, it is poised to become even stronger during 2015.
Real estate investors are forever looking for fast-growth markets to give them a tide that will lift their boats. A joint study from the Brookings Institution and J.P. Morgan Chase indicates that investors would do well to point those vessels toward China and Turkey.
Second-hand real estate is finally dealing a hot hand. After years of prophecies that vintage real estate investments would become a brisk trade, the secondary market for global real estate closed an estimated $4.8 billion in transactions during 2014.
The Blackstone Group is apparently well on its way to raising the industry’s first fund with a $13 billion equity target. After less than a month of official fundraising, BREP VIII is reportedly ready to hold its first close with $10 billion of commitments.
Investors are likely to see more forks than ever clashing over the global real estate pie, as some 60 percent of Asian investors expect to take a bigger slice in the coming years, targeting an average increase in real estate allocation from 9.8 percent to 11.0 percent.
Only 27 private equity real estate funds recorded final closings during fourth quarter 2014 — four funds short of the number closed during fourth quarter 2013. And what the group lacked in number of funds, it made up for in fundraising volume.
Colin Hill, vice president at Cigna Realty Investors, answers five questions.
The annals of real estate will show that 2014 put an exclamation point on the U.S. economic recovery. During 2014, some 13,767 properties valued at $10 million or more were sold for $350.9 billion, or an average of $25.5 million each.
As Latin America is still perceived as part of the developing world, its expected high economic growth holds a magnetic attraction for deep-pocketed outside investors seeking outsized returns with opportunistic plays. And, as professionals tracking expansion of the region’s data center business are keen to point out, demand for the sector’s facilities and services has clearly been outpacing supply, engendering potentially lucrative opportunities to fill corresponding voids.
With gateway cities having turned hyper-competitive and overpriced, a slew of second-tier markets are on the rise and attracting investor capital. Cities such as Atlanta, Austin, Houston and Miami appear second-to-none in the eyes of investors looking to put their capital to work.
Plan sponsors are faced once again with the familiar but unwelcome dilemma of choosing between two roads: short-term yield gains or superior long-term income growth.
In private real estate, investors face the dilemma of attempting to evaluate performance without the benefit of a commonly agreed upon benchmark, as globally comprehensive real estate return comparisons still remain elusive.
During the recent Visions, Insights & Perspectives – Americas conference, produced by Institutional Real Estate, Inc., 30-year institutional real estate veteran Joanne Douvas moderated a panel discussion about the Americas’ great gateway cities, focusing on what makes those cities great and the opportunities they currently offer for real estate investors.
The NCREIF Property Index ended 2014 with an 11.82 percent return for the year, with double-digit returns for all sectors. The strong returns reflect improving fundamentals for the commercial real estate market combined with cap rates continuing to stay at historically low levels.