2023 Global Outlook: Disruption Brings Real Estate Opportunities

​Report analyzes transaction volume, debt availability and asset pricing and identifies opportunities in the Americas, Asia, Europe.

Hines, the global real estate investment, development and property manager, released its global outlook titled, “2023: Navigating Through the Labyrinth” today. Following the turbulence in 2022, opportunities will abound this year due to repricing, continued outperformance of high-quality office assets, and deflation in some key sectors.

Global Chief Investment Officer David Steinbach said, “In a period of global economic discord, transaction volume will be unlocked with debt availability and the reset of pricing levels more in line with expected fundamentals. Successful acquisitions and developments in the new year will also focus on high quality assets that meet customer demands for simplicity and flexibility. We expect to see more accretive opportunities emerge in 2023.”

Looking at global trends, the report reveals that mostly industrial and for-rent residential markets continued to have solid fundamentals. Retail fundamentals saw recovery from the damage caused by lockdowns, but high inflation in many markets is cutting into discretionary spending and is disrupting continued recovery. While short-term rates are expected to fall and long-term rates to remain sticky, the report outlines a few key areas as signs for investors to pivot strategies, including improvement in transaction volume, rising availability of traditional debt, and cost-averaging down (i.e., deploying capital patiently during a market disruption). 

Sectors in Our Sights

Utilizing proprietary research tools to analyze market data, the report provides sector insights for the Americas, Asia, and Europe and suggests how real estate investment strategies should evolve this year:

Americas

Investors are still recalibrating their portfolios, as they have seen downturns on both the equity and fixed-income sides of their ledgers. Tenants have been reviewing their growth plans for the year ahead and pausing on new activity, however, there is potential for opportunities during the second half of the year, including: 

• Industrial: Industrial fundamentals are still strong in most markets, but demand will drop if discretionary consumer spending is negatively impacted by the downturn. The most interesting opportunities are in high barrier markets where yield premium to acquisition value is substantial.
• Office: Continued caution is warranted as the full impact of hybrid schedules has not been fully absorbed. Flight to quality will remain evident in new development performance as a better designed, modern, sustainable product.
• Living: Careful submarket selection is paramount, as some markets are oversupplied, and affordability ratios are elevated. Secondary and tertiary markets may provide outsized opportunities arising from migration trends, and there is continued demand for larger units, activated green spaces, and single-family rentals. 
• Retail: Compelling opportunities are emerging to redevelop dated retail for the highest and best use, such as grocery-anchored, lifestyle and open-air service-oriented retail offerings and last-mile logistics.

Asia

Against the backdrop of this year’s macroeconomic and political headlines, the rebalancing of real estate product types has largely played out. Trends have indicated that the real estate industry’s main sectors may converge further. Opportunities exist in: 

• Industrial: Demand for logistics space remains strong to address e-commerce demand, and as Asia’s economies become wealthier, there is a need for more cold-storage facilities.
• Office: Assets have seen strong growth in high-value locations. While Asia has not been hit as hard by working from home or hybrid schedules, attracting new tenants to office spaces will require a new creative dimension of user experience.
• Living: Rental demand continues to grow in markets where homes have become increasingly unaffordable; this includes developed markets like Australia, Korea and Japan.
• Retail: Yields for retail assets have been attractive relative to other property sectors. Increased stability in retail fundamentals will continue as vacancies and rents have been stable or moving in the right direction.
• Emerging Sectors: Sectors such as life-sciences are institutionalizing, suggesting higher income yields and growth prospects.

Europe

As we look at strategies for 2023, the ‘beds and sheds revolution’ of recent years has played out. There is no longer a standout winning sector. Our ability to understand nuances of quality within a product type has become more important than just picking the right general bucket. Opportunities will include:

• Industrial: As capital demand normalizes, focus is expected to return to individual assets and location quality.
• Office: The future of the office debate continues with a focus on a flight to quality – with occupiers seeking a path to net zero. This means there is a smaller pool of viable assets, yet a focus on prime buildings given ESG should outperform older assets.
• Living: Mainstream residential is losing its appeal as yields tighten and heightened regulation (e.g., Ireland, Netherlands, Germany) has restricted rental growth. However, niche product types such as senior living, student housing and serviced apartments maintain their appeal.
• Retail: The sector is faring better than expected. Negative sentiment has resulted in attractive pricing; however, new economic headwinds and uncertainty will delay a quick sector rebound as consumer confidence continues to draw back.

Click here to read the report and watch a video from David Steinbach, global chief investment officer at Hines.
 
About Hines

Hines is a global real estate investment, development and property manager. The firm was founded by Gerald D. Hines in 1957 and now operates in 28 countries. We manage a $92.3B¹ portfolio of high-performing assets across residential, logistics, retail, office, and mixed-use strategies. Our local teams serve 634 properties totaling over 225 million square feet globally. We are committed to a net zero carbon target by 2040 without buying offsets. To learn more about Hines, visit www.hines.com and follow @Hines on social media.
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¹Includes both the global Hines organization as well as RIA AUM as of June 30, 2022.