Tue, 17/12/2013 - 12:31
Changes linked to demographics, technology and urbanisation (DTU) are likely to become key drivers for growth in the global property market in 2014, according to LaSalle Investment Management’s 2014 Investment Strategy Annual (ISA).
Populations are ageing, while younger people are increasingly drawn to city-centre living, and businesses are adapting to provide more connectivity in the workplace.
This gives investors the chance to closely examine opportunities in the DTU space such as healthcare, urban residential projects with good access to work and to shops and office space that has connectivity and sustainability, and logistics space linked with e-commerce.
“Urbanisation is on the rise in many markets, creating opportunities to invest in projects that are served by transit that meet the demand for denser, multi-purpose buildings,” says Jacques Gordon, global head of research and strategy for LaSalle. “Meanwhile, the ageing of the baby boomers also has implications for all types or real estate including housing and healthcare. Investors will need to take account of all these factors when making their investment decisions in 2014."
The shift towards DTU-linked investment will reinforce other trends in the global property investment market, the ISA found. Increasingly, investors will transition from a domestic-only approach to one that also includes international real-estate holdings. With core yields still under pressure, investors should consider moving to higher-yielding sectors such as logistics, healthcare or student housing. They should also seek locations on the edge of central business districts, rather than competing for the most expensive buildings in the heart of major financial centres.
Other themes for 2014 include:
• Risk-averse behaviour is likely to continue to ease as sophisticated investors begin to take more risk in 2014.
• Equity and debt will continue to be plentiful for fully-leased, modern assets in cities such as London, San Francisco and Hong Kong.
• Investors will need to avoid competing with growing sources of domestic capital in emerging markets
• New sub-types of real estate assets such as laboratory space, healthcare centres and student housing will continue to be introduced in various countries.
Despite governmental uncertainty in the US, in 2014 the economies and real estate markets in North America should make steady forward progress. In 2015 and beyond, the underlying positives of globally competitive companies, recovering housing market in the US, and lowering dependence on foreign oil should bring the US and the region to trend growth levels.
Economic conditions in Canada and Mexico will continue to rise and fall in tandem with those in the US Canadian property markets remain healthy and much of the new supply is pre-leased or is replacing obsolete product. Canada faces challenges in identifying new markets for its exports, as well as a potential housing slow down. Mexico is implementing important reforms to its education, fiscal, banking, telecommunications, and energy sectors that are designed to increase structural GDP growth. These reforms should facilitate improvements over time, but could be disruptive in the short term.
“We see opportunity across North America in 2014, as the economies and real estate markets continue to make steady progress,” says Bill Maher, director of North American investment strategy at LaSalle. “We’re particularly optimistic about a handful of markets where key trends converge. For instance, in cities where there’s growth expected due to urbanisation and changing technology needs, we could see strong market support for new development and major renovation in the coming years.”
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