Investing with intent becoming as clear a priority as financial performance
LONDON, UK and TORONTO, CANADA, December 8, 2021 – Leading diversified professional services and investment management company Colliers (NASDAQ and TSX: CIGI) reveals quality office assets in major metropolitan markets like London, New York, Tokyo, and Sydney have retained their allure and will be in high demand next year. Core and core-plus office spaces are the top global strategy picks, with 60% of investors stating these as their investment preference for 2022, a 50% increase from last year.
Their appeal not only stems from the realization that office demand is here to stay, particularly in cities supported by strong transport infrastructure and high amenity values, but also the ease of large-scale capital deployment that office assets represent. The rising cost of construction, viewed by 4 in 5 (81%) investors as a pain point, limiting new builds, renovations, and retrofit projects amplify the race to core. Investors expect core office values to increase by up to or more than 10% over the next 12 months due to the stark imbalance between demand and supply.
“Based on our 2022 Global Investor Outlook, pent-up demand and delayed transactions will translate into momentum next year. However, investors face an increasingly complex and competitive marketplace, coloured by new regulations and COVID-19 uncertainties. With the amount of dry powder readily available, offices in Tier 1 cities are seen as safe haven assets that offer an attractive route to deploy capital,” said Tony Horrell, Head of Global Capital Markets at Colliers.
Investing with intent
This year’s report shows ESG (environmental, social, governance) considerations are prominent, with nearly 3 in 4 investors integrating environmental factors into their strategies. This desire to invest with intent is both a means of future-proofing their assets and responding to stakeholder and societal pressures requiring them to respond to the climate crisis.
Sustainability is creating a greater chasm between newer, high-quality assets in prime space and older, second-hand stock in city submarkets. To protect their portfolios, investors are concentrating on Grade-A buildings that prioritize sustainability and wellness credentials, while disposing of aging, non-compliant assets that risk potential obsolescence if they are not regarded as retrofit opportunities to capitalize. This recalibration of assets under management will drive market turnover.
“COP26 has reinforced that the next 10 years are imperative to the future of our planet,” said Chris Pilgrim, Director of Global Capital Markets. “The pandemic, climate-related disruptions, and growing recognition of social inequality are prompting investors to adopt a more robust approach to sustainability-related risks. As the number of ESG regulatory requirements continue to soar, we expect investors will be rushing to sell potential stranded assets to avoid discounted prices later.”
Partnership key to realizing diversified portfolios
The pandemic introduced new risks and heightened others for certain real estate assets. Investors are looking for more ways to ensure their portfolios are resilient and diversified, exploring specialized assets such as data centres, life science facilities, affordable and student housing that benefit from their strong ties to demographic and societal trends.
“Joint ventures, local partnerships, and M&A strategies are great for savvy investors who want to get ahead. Alternative assets present compelling investment cases, but their unique characteristics make teaming up with the right partner essential. There is a clear need for expertise to fill knowledge gaps and safely guide capital, particularly those in nascent sectors,” said Damian Harrington, Head of Global Capital Markets Research.
Other key findings from the Colliers 2022 Global Investor Outlook include:
- Logistics: Industrial and logistics assets are the most attractive asset class overall, with 69% of investors choosing this as the preferred sector globally, due to the surging demand for e-commerce.
- Retail: Grocery-linked convenience assets are the most popular retail asset type, accounting for 60% of the retail vote globally, yet some segments of retail such as luxury high-street are making a comeback. Shopping centres are ripe for conversion to last-mile logistics or mixed-use assets, with 30-50% of investors expressing interest in opportunistic and value-add strategies.
- Multifamily/build-to-rent: Investors’ optimism about the broad range of residential opportunities connected closely to economic and demographic trends is driving higher investment volumes in all markets in 2021. Multifamily is the third most popular sector, with 42% of investors expressed an interest in in 2022.
About the Colliers 2022 Global Investor Outlook
The second edition of our annual outlook for global property investors is based on a focused survey undertaken by 300+ investors across the globe and in-depth interviews with our regional Capital Markets leaders. The findings and opinions featured in the report are shaped by their responses.
Read our 2022 Global Investor Outlook Report