New sectors and locations attract capital
What if alternative investments and locations could mitigate risk and drive greater long-term growth?
There is currently US$1.5 trillion of new capital targeting global real estate from institutional investors, private equity and emerging new sources, which will support demand for property assets as capital-rich investors chase yield.
While the traditional sectors such as offices, logistics, residential and retail stand to benefit from this influx of capital, emerging property sectors are growing fast, particularly living, logistics, life sciences, data centres and self-storage. These alternative investments are resilient assets with the ability to guard portfolios against future risks.
Investors and developers will focus on investment opportunities in the cities known as Innovation Geographies, which have recorded the fastest rental growth over the past decade and will continue to attract a higher proportion of capital. Almost half of investors surveyed (44%) say they will place greater emphasis on city investment strategies than before the pandemic.
Reasons to diversify
Flexible working is driving different patterns of living, working and consumption. Technology adoption is the enabler and it is impacting real estate value creation in different ways across the sectors. Purpose-led expectations from corporates and consumers are driving sustainability as a means to create resilience in the built environment.
The living sector is evolving to meet demand for active later living, coliving and Build to Rent. The momentum behind life sciences is underpinned by the burgeoning health needs of baby boomers and technology. Our transition to a higher proportion of consumption through online platforms is driving growth in data centres and the need for urban logistics and warehouse space.
The capital base for real estate is broadening and deepening. Most markets and sectors are experiencing higher proportions of international capital and there is a wider range of sources for both debt and equity strategies. Investors have a growing set of choices through partnerships, indirect and public markets that expand the spectrum of solutions to meet investment criteria and return expectations.
Restructuring and refinancing a major UK hotel group
Investors need to reposition, diversify and repurpose
Recalibrate your asset and capital strategies
Investment and capital strategies suited to the pre-pandemic landscape may no longer be profitable.
Build resilience to withstand future unknowns.
Investors will repurpose existing assets to build resilience across their portfolio and drive performance
Reposition, diversify and repurpose your assets and portfolios.
Traditional real estate investment approaches are being challenged and investors need new strategies to drive returns and reduce risk.