Colliers research points to a broad-based renewal of activity in the property market in 2021, as investors look to deploy pent-up capital in high-potential markets and sectors.
With investors sitting on substantial amounts of dry powder and looking to make up for lost ground, Colliers expects total investment activity to increase by up to 50% in 2021. According to Colliers International’s new Global Capital Markets 2021 Investor Outlook, 98% of investors across all regions aim to expand their portfolios this year, with around 60% looking to expand by more than 10%, including 23% who want to expand by 20% or more.
Colliers research points to a broad-based renewal of activity in the property market in 2021, as investors look to deploy pent-up capital in high-potential markets and sectors. To provide some context, 1% of global assets under management equates to around $1.65 trillion, which was the annual average global investment total from 2015-2019. With 2020 volumes falling to around $1.3 trillion and allocations to real estate continuing to expand, the weight of capital is potentially capable of doubling global investment volumes should market conditions allow.
The roll out of COVID-19 vaccines will have a very positive impact on markets and global geo-political stability, courtesy of a Brexit trade deal and a US election result, provide much needed certainty. These factors will help drive market growth in 2021. Although a large proportion of investors are looking to get out of the blocks early and identify acquisitions in Q1, Colliers experts believe the rebound in activity will gain strength from Q2 onwards due to lingering uncertainty over travel in the first quarter.
With the pandemic weighing on activity for much of last year, many investors are sitting on record cash piles and expect significant opportunities to emerge in commercial real estate, especially with continued stimulus likely to make yields on equities and bonds comparatively less attractive. Across regions, a clear majority of investors are planning to expand their real estate portfolios in 2021, in many cases by double digits.
“The investment climate in India is very buoyant with interest from global investors to invest in real assets getting stronger. This is because global interest rates are at historic lows and India has emerged among the preferred destinations for investments in real estate that generate higher returns against the quality of assets available. The resilience of the Indian real estate markets is also evident from the continued positive sales performance across various markets in residential projects and the stable office occupancy post the COVID-19 outbreak,” said Piyush Gupta, Managing Director, Capital Markets & Investment Services (India), Colliers International.
The report drew nearly 300 respondents including major institutional investors, listed property companies, sovereign wealth funds, private equity funds, family offices and third-party money managers.
EMEA Investors asset class & strategy preferences for 2021
# The pie chart represents how often each asset type was chosen relative to total responses provided. For each asset type, the % figure indicates the percentage of investors surveyed who chose this specific strategy, whereby each investor could choose multiple strategies.
India is witnessing international capital inflows into markets. As per the survey, the top asset classes (where investors are looking at investing in 2021) for major markets like Bengaluru, Delhi NCR and Mumbai are commercial office, mixed-use and logistics. For Mumbai and Bengaluru markets, data centers ranked fourth, while it was residential assets for Delhi NCR.
Additional key takeaways from the Colliers Global Capital Markets 2021 Investor Outlook report include:
# Top-tier city offices remain a primary asset target. Investors with international capital find the scale and liquidity of the office sector in major commercial hubs such as New York, London and Sydney appealing. Having office assets that meet health, sustainability and technical benchmarks is important to investors.
# Logistics and residential sectors are thriving. Both sectors were among investors’ top three choices across all regions. Intense demand for these assets will require investors to broaden their geographic focus and build portfolios through joint venture platforms and local partnerships.
# Opportunities to repurpose discounted retail and hospitality assets. Investors are expecting to see pricing discounts of over 20 percent in these sectors. They represent a rare opportunity to acquire distressed assets for ambitious repurposing initiatives.
# Alternatives, platforms and partnerships are playing a bigger part. Rising demand for alternative real estate such as data centres, senior living and life science assets reflects broader structural shifts amplified by COVID-19.