The Institutional Real Estate Inc Sponsorship brochure, Connected-Investor Focused, We connect people, data and insights, sponsorship, events, IREI Products
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NAREIM DIALOGUES SPRING 2018 45 Office rental growth strongest since 2011 Rents for prime offices across 26 major markets grew by 4.1 percent for the full- year 2017, double our forecasts at the beginning of 2017 and the largest increase since 2011. More of the same is expected for 2018, with growth projected to average 3 percent and top performances going to Singapore and Sydney. Only Shanghai, Mexico City and Beijing are slated for rental corrections over the coming year. Retail markets focus on asset enhancement and tenant mix Retailers are adapting and re-evaluating their existing physical space in response to the structural change impacting the sector, with a notable acceleration in new business models and owners investing to create mixed-use destinations for the evolving shopper. The U.S. retail market expansion continues to slow as low vacancy and a focus on renovation of existing space rather than construction keeps rents inching up, though at a reduced pace. Strong confidence and job creation continue to drive consumer spending in Europe, although prime high street rents are broadly stable in most markets. In Asia Pacific, many retail landlords are adjusting tenant mixes while retailers focus on consumer engagement and experience, with generally flat rents across the region. A banner year for global logistics markets Global logistics markets ended 2017 on a high, with robust demand and vacancy at historic lows propelling further rental growth. The U.S. industrial market registered its best fourth quarter of net absorption on record in Q4 2017, driving vacancy to an all-time low and spurring additional rental growth. In Europe the regional vacancy rate has also fallen to a new low with 2017 take- up well above the long-term average. Rents continued to edge up in most markets across Asia Pacific, supported by the uplift in global trade. With buoyant demand and a lack of modern vacant space, we expect continued rental growth momentum in 2018. Continuing economic growth extends hotel cycle The global travel market remains robust, leading to positive hotel operating performance in all three global regions. Continuing economic growth is supporting a healthy hotel investment environment, with global hotel transaction volumes totaling US$62.5 billion in 2017, on par with the levels seen in 2016. Investment funds and private equity firms stayed the most active buyer group in 2017, while institutional investors continued to increase their allocation to real estate, more than doubling their share of acquisitions since 2014, from 4 percent to 10 percent in 2017. New supply outpaces still solid demand in U.S. multifamily market The U.S. multifamily rental market continues to adjust to an influx of new supply being delivered across the country. 2017 marked the expected peak of the development cycle, with annual rental growth decelerating and a slight rise in the national vacancy rate to 5.2 percent. With new groundbreakings in the multifamily sector now slowing, fundamentals are well positioned to stabilize over the next 18 to 36 months. Institutional investor demand remains buoyant in continental Europe, with investment volumes climbing higher in Germany while the Netherlands registered a record year for transactional activity. The UK institutional market remained on its growth trajectory, with investment volumes 20 percent higher in 2017 and expectations of continued strong growth this year. In Asia Pacific, a tight housing policy stance and limited issuance of pre-sales certificates have impacted sales activity in Shanghai. Elsewhere, market sentiment has led to sustained sales momentum in Singapore as well as Hong Kong, where buyers have snapped up flats in new launches. GLOBAL PERSPECTIVES ©iStock.com/MicroStockHub