Global Trade & Commercial Real Estate Investment – A FIRB Review
Charter Keck Cramer
The following Insight explores the relevance of FIRB approval data in the context of understanding international investment patterns into Australian Commercial Real Estate.
Cat Global Investing
Chinese Outbound Investment
China has been a major driver of global investment flows into real estate in recent years. CBRE Research data show that Chinese outbound investment in real estate rose from around US$8 billion in 2013 to just over US$35 billion in 2017.
Following a government clampdown on debt-fueled offshore investment and tighter scrutiny of overseas real estate acquisitions, buying activity slowed significantly in H2 2017 and is expected to weaken further this year as additional restrictions take effect.
This ViewPoint analyses current trends in Chinese outbound investment and explains why CBRE Research believes the recent slowdown signals the start of a new chapter, and not the end of the story.
Chinese Capital Control Update
Cushman & Wakefield
On August 18th 2017 China’s State Council released a new circular on outbound investment. This effectively codifies previous tightening measures and applies specific attention to overseas investment in the property and hotel sectors. Cushman & Wakefield’s Greater China Research team has analysed this latest circular in the attached report and reviews the implications for future Chinese investment in Global real estate markets.
Benefits of Foreign Investment in Real Estate
ACIL Allen Consulting
ACIL Allen Consulting was commissioned by the Property Council of Australia to undertake a study of the economic benefits of foreign investment in real estate. A new ACIL Allen Consulting report, commissioned by the Property Council of Australia, has highlighted the strong and substantive benefits to the economy of foreign investment in commercial and residential real estate.
Active Capital – The Report
Knight Frank’s first edition of Active Capital share their experiences and views on the latest dynamics in the global real estate capital markets. At this point in the cycle the increasing challenge for us all is how to generate alluring returns without significantly increasing the asset risk profile. With the global environment for investment shifting, strategies will need to adapt. So, who will be investing and why? And will the Knight Frank Super Cites remain the hubs of global activity? Knight Frank share the latest real estate intelligence from across our Global platform and assess its impact. One thing is certain, despite a reduction from the huge deal volumes of the last few years, the capital chasing global real estate remains very active.
2017 Atlas Summary
Cushman & Wakefield
Cushman & Wakefield’s 2017 Atlas Summary report tells the investment stories that are driving the market ahead.
Despite political uncertainty, rising populism and the threat of protectionism, cross border real estate investment interest remains high and capital continues to flow in and around all areas of the world. However patterns of global activity are changing in terms of who is investing and where, as new priorities emerge for some investors while others simply slow their pace of activity. As a result, the most competitive sources of capital will continue to shift more rapidly than the market may expect.
Australian Investment Managers Cross-Border Flows Report
Perpetual and the Financial Services Council
Perpetual and the Financial Services Council have partnered again to produce their fifth annual Australian Investment Managers Cross-Border Flows Report.
The report is undertaken annually to better understand the implications of policy changes flowing from the Johnson Report and other policy changes impacting the export of managed funds products to offshore investors – and focuses specifically on fund flows into Australian Management Investment Trusts (MITs). The 2016 report builds on previously collected data and provides unique insights into which regions, asset classes and investor types have experienced the greatest growth (or loss) of inflows.
Key findings at a glance
- Asia Pacific is the dominant source of cross-border fund inflows representing 62%.
- Overseas money flowing into Australian MITs has grown at a compound rate of 17.8% per annum over the six year study period.
- Other fund managers were the biggest source of investment (48%), followed by pension funds (16%) and sovereign wealth and endowment funds (9%).
- The most popular asset class was Australian property with 31.1% ($15.59 billion) of funds sampled, followed by Australian fixed interest and cash at 21.5% ($10.75 billion).
The report highlights the exceptional times we live in. Over 490 million people reside in countries with negative interest rates. Around 60% of the world’s citizens now own a smart phone. Four billion people live in cities, up by 23% on ten years ago. These figures highlight three trends shaping our times.
- Firstly, negative interest rates have reduced investors’ expectations on what constitutes an acceptable return. This is drawing capital towards real estate.
- Secondly, a volatile economy has not stopped an avalanche of technological innovation, and demand for property has benefited on a global scale.
- Thirdly, our fast growing cities are centre stage in the digital and creative revolutions, and in most of the Global Cities supply is not keeping pace with demand for both commercial and residential real estate.
Invesco Global Sovereign Asset Management Study 2016
Invesco’s 2016 Sovereign Asset Management Study seeks to build on the findings from previous years’ studies by analysing long- term trends as well as uncovering new insights from face-to-face interviews with chief investment officers or strategy unit executives at 77 leading global sovereign wealth funds, government pensions funds and central banks, covering more than US$ 7 trillion of assets (as at March 2016).
Fund Manager Survey 2016
ANREV INREV NCREIF
According to the latest ANREV, INREV and NCREIF Survey of real estate fund managers, total real estate assets under management (AUM) reached US$2.19 trillion in 2015. Overall, the 10 largest fund managers represent 41.0% of the total AUM, up from 36.5% last year. The survey found:
- Real estate assets under management grew to US$2.19 trillion
- The big managers keep getting bigger
- North American and global strategies are much larger than other strategies
Trends And Insights From The 2015 IPD Global Annual Property Index
Global property held directly by private investors delivered a total return of 10.7% in 2015, marking the sixth consecutive year of positive performance since the global financial crisis (GFC). MSCI’s annual report on global property performance is presented in two sections. The first reviews the year’s results, globally and across national and metropolitan markets. The second section, recognizing investors’ increasing focus on income, explores some of the implications for leasing strategies across global markets and property sectors.
MSCI processes full investment performance details using a large dataset of over 64,000 individual assets for the IPD Global Annual Property Index. These assets were valued at US$1.5 trillion in 2015 and were appraised on a frequent schedule of no less than once per annum. This dataset provides insights across geographies and property types, and is the basis of a series of analytical tools for portfolio managers, strategists, and risk managers.
Chinese Demand For Australian Property
Chinese investment in Australian residential and commercial property has increased significantly in recent years. The Australian banking system’s direct exposure to Chinese property investors and developers appears to be small. However, if Chinese demand were to decline significantly, that could weigh on domestic property prices and so lead to losses on the banks’ broader property-related exposures. This paper explores these issues further.
The Great Wall of Money
Cushman & Wakefield
The Great Wall of Money has been tracking the amount of newly raised capital targeting commercial real estate globally since the onset of the financial crisis. The report monitors capital available predominantly from funds, listed companies and institutions and explores the geographies and asset types it targets. With investors from all regions now focused on deploying capital, how will the weight of money into CRE stand up throughout 2016? In this edition, Cushman & Wakefield have found that available capital has now reached a new high of US$443 bn – with no limits to where this capital is flowing. Indeed, as all regions are targeted by this great wall of money, investment levels will likely reach record or near record levels in an increasing number of markets.
2016 Global Investor Outlook
Colliers International’s 2016 Global Investor Outlook found Australia remains a top destination for investment, popular with both local and offshore investment. On a global basis, only London ranks higher than Sydney and Melbourne as cities that investors want to be in. To inform the report, more than 600 global investors – from sovereign wealth to private equity firms – shared their global and regional forecasts for 2016 and beyond.
Local trends to emerge from the survey include:
- Globally, more than half of all investors are looking to expand their portfolios
- Australian and New Zealand investors continue to view CBD office as their preferred investment class, followed by residential development sites as the second most popular investment class.
- Domestic investors remain unwilling to take on higher levels of risk to achieve higher returns, and are ranked among the most risk averse investors globally.
Chinese Capital Flows and Capital
Eden Hatzvi, Jessica Meredith And William Nixon – RBA Bulletin
December Quarter 2015
Chinese private capital flows are dominated by foreign direct investment and banking-related flows, with portfolio flows remaining relatively small (as a share of GDP). Of these components, banking-related flows account for the majority of the cyclical variation in total flows and seem to be driven by expected changes in the exchange rate. Both the composition of capital flows and the factors that drive their variation are likely to change as the Chinese authorities gradually open the capital account in line with their stated intention. Given the size of China’s economy, the implications of a continued opening of its capital account and a significant increase in capital flows are potentially very large. They include a greater influence of global financial conditions on China (and vice versa), a change in the composition of China’s net foreign assets, and a change in the nature of the economic and financial risks facing China.
Investor Universe: Chinese Capital Flows South IPE Real Estate
Australia is a top target for China’s sovereign wealth fund and the country’s insurers are expected to lead the charge, writes Sharon Hayes
Emerging Trends In Real Estate – Asia Pacific 2016
PwC / ULI
What are the best bets for investment and development in 2016?
Emerging trends in real estate® gives a heads up on where to invest, which sectors and markets offer the best prospects and trends in the capital markets that will affect real estate.
The study reflects the views of almost 350 influential leaders in the real estate industry and highlights include:
- What to expect and where the best opportunities are
- Trends in the capital markets, including sources and flows of equity and debt capital
- Indications of which property sectors offer opportunities and which ones to avoid
- How the economy and concerns about credit issues are affecting real estate
- Which metropolitan areas offer the most and least potential
Chinese Insurance Outbound Capital
Cushman & Wakefield
This paper investigates the amount of future capital to be invested overseas by Chinese Insurance companies, including the geographies and types of assets that they will target.
- Chinese insurance companies have only been allowed to invest in real estate since 2009. Further deregulation in 2012 allowed investment in overseas markets and today overseas investment can be up to 15% of total asset value.
- Current holdings of investment properties for all Chinese insurance companies totals USD13.4bn, an allocation of 0.8%. Just under half of this (USD6bn) Cushman & Wakefield estimate is held overseas. The top five insurers have an allocation of under 2% underscoring the potential for rapid growth.
- Allowing a full allocation could see an additional USD240bn deployed. Practically Cushman & Wakefield foresee average allocations rising to near 5% by 2019, equivalent to an additional USD73bn of investment. This could increase by a further USD75bn by 2024.
- Whilst the initial wave will be led by the larger insurance companies, Cushman & Wakefield expect smaller sized companies to follow as they build teams to invest directly.
- With current premiums per capita in China well below those of established western economies, Cushman & Wakefield foresee much of the growth coming through growing premiums and assets under management than pure increases in allocations.
- Investment will spread from New York and London to leading gateway cities which regularly witness transactions in excess of USD100m including Berlin, Washington DC, Paris, San Francisco, Sydney, Singapore and Tokyo.
Reflecting their desire to grow holdings Cushman & Wakefield see investment spreading to a broader range of geographies and assets as well as increased development.
2015 Australian Investment Managers – Cross-Border Flows Report
Perpetual And Financial Services Council
The report provides unique insights into which regions, asset classes and investors types have experienced the greatest growth (or loss) of inflows since the MIT regime was introduced to promote investment into Australia.
Twelve leading fund managers participated in the study representing over $43.6 billion out of a possible $82.7 billion of overseas sourced funds*.
- Foreign investment into Australia through MITs has more than doubled over the past five years
- 65% of foreign funds inflows are sourced from Asia Pacific
- 56% of fund inflows sourced from overseas are then being invested back overseas
Preqin Investor Outlook: Alternative Assets, H2 2015
The Preqin Investor Outlook: Alternative Assets, H2 2015, provides an in-depth look at the appetite, plans, expectations and concerns of institutional investors in private equity, hedge funds, real estate, infrastructure and private debt. This report presents the views of more than 460 surveyed institutions alongside the in-depth data for more than 12,500 investors available to users of Preqin’s industry-leading online services.
Capital Attraction: The Rise Of Australia As An Investment Destination
Stephen McNabb, Head of Research at CBRE, presented a paper on foreign investment in Australia at the UNSW Real Estate Conference. Stephen looked at Observations on capital flows to Australia, What’s attractive about Australia ? Offshore investment into residential real estate and Cross border capital flows outlook and implications.
Investor Views: Real Estate Attractive Despite Pricing Concerns
Using information from their recently released Preqin Investor Outlook: Alternative Assets H2 2015, Preqin explores institutional investors’ objectives, satisfaction with returns and activity within the real estate asset class.
Global Investment Managers 2015
Institutional Real Estate, Inc
Every year, Institutional Real Estate, Inc., teams up with Property Funds Research to survey real estate investment managers from around the globe for a Global Investment Managers report. They survey them on their assets under management, how many vehicles they have, where they invest most globally, and so forth. This year’s survey showed the amount of capital flowing to the asset class has continued to increase year-over-year, as reflected by the growth in aggregate total assets under management as reported by the 208 firms in the Global Investment Managers 2015 survey. Last year’s survey saw the 2013 total grow by 10 percent over that of 2012, and the total has risen an additional 16 percent this year, growing from the 2013 total of $2.14 trillion to $2.48 trillion in 2014.
Institutional Investor Delivering Alpha – Real Estate
Jonathan Gray, Blackstone’s global head of real estate, spoke at a recent CNBC conference on a range of topics, including values, foreign investors and where the industry is in the current cycle. Blackstone recently raised more than US$15 billion for real estate investing from a range of global institutions – the largest private real estate fund raising ever completed.
For the video – Click here
For the transcript – Click here
Emerging Trends in Real Estate Asia Pacific
ULI and PWC
Emerging Trends in Real Estate® Asia Pacific is a trends and forecast publication and is one of the most highly regarded and widely read forecast reports in the real estate industry. Undertaken jointly by PwC and the Urban Land Institute, this report provides an outlook on real estate investment and development trends, real estate finance and capital markets, property sectors, metropolitan areas, and other real estate issues throughout the Asia Pacific region including Australia.
Money Into Property
This report provides a global focus and highlights trends in the market from both the debt and equity perspective. It provides up-to-date insight on investors’ and lenders’ sentiment as well as commentary on market activity and liquidity.
The Investment Characteristics And Benefits Of Asian REITs For Retail Investors
Professor Graeme Newell
The report explains what a REIT is, the investment characteristics and benefits of Asian REITs, what distinguishes REITs from stocks and bonds, and how Asian REITs have performed.
Yield Comparisons For AP office Markets – Standardising The Cross-Border Metrics Globalising Real Estate Markets Require Robust And Consistent Cross-Border Valuation Benchmarks.
Globalising real estate markets require robust and consistent cross-border valuation benchmarks. Yields, widely-used as a benchmark of value for comparisons between markets, can conceal a range of factors such as varying lease duration, escalation clauses and rent-free incentive periods that materially influence investment performance between markets and through time. In a paper to the U NSW Real Estate Conference, Dr David Rees shows how adjusting for these factors provides a more consistent basis for yield comparisons across some of the major Asia-Pacific office markets.