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Global real estate market stabilization likely to take hold mid-2023

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Multifamily and industrial are top asset classes for capital across the Americas and are seen as a defensive strategy in an evolving market.

New York, December 8, 2022 – After a volatile year of geopolitical tensions, economic shocks and uneven monetary policy, in its latest Global Investor Outlook report, Colliers (NASDAQ and TSX: CIGI) anticipates the stabilization of the global real estate market to take hold by mid-2023. While some countries such as the U.S. and UK have already witnessed a rapid pricing reset, this has not been universal. Investors can expect big differences in how the reset plays out across sectors and markets next year.

Economic and Investment Outlook

As expected, there is a clear shift in liquidity indicated in this year’s survey compared to last year’s survey. The higher cost of capital, construction, and operations, as well as availability of product, have investors anticipating value declines in 2023.

“In the U.S., investors will find opportunities in the gateway markets as liquidity events force decision making. This will allow buyers to reposition assets, through reinvestment or conversion. Alternative asset classes such as life science are viable targets, while residential conversions are also gaining traction,” said David Amsterdam, President, U.S. Capital Markets & Northeast Region.

Compared to EMEA and APAC, investors in the Americas are less worried about deglobalization, demographic pressure, and currency fluctuation. Investors are concerned about the impact of inflation eroding values. Supply chain disruption, cybersecurity vulnerability, and talent availability are also pressure points for investors. Rent expectations have come down relative to 2022 but there is still a positive sentiment on rent growth.


Core Assets Prevail

Multifamily is the #1 asset choice for investment. This is a change from last year where industrial was the top investment choice. Multifamily has led the U.S. in sales volume in recent years, and that doesn’t look to change anytime soon. Multifamily investors are looking to both core and value-add urban assets. Under-supplied housing markets help underpin capital values and support income growth.

“The U.S. is vastly under-housed and this won’t be solved in a short amount of time. This is exacerbated in a higher interest rate environment with the cost of building materials rising and labor shortages prevalent,” said Aaron Jodka, Director of Research, U.S. Capital Markets.

Industrial is the #2 investment choice. Investors are most focused on last mile distribution properties, continuing to try and capture momentum from e-commerce. This is also seen as a defensive strategy due to strong occupancies and rising rental rates in this asset class.

While office is the top investment choice globally, investors in the Americas are most interested in top-rated energy/operation/embedded carbon assets (ESG-compliant) in CBDs. Suburban investors are most interested in standard energy/operation/embedded carbon assets. Value-add players are most interested in secondary/non-CBD markets, irrespective of energy efficiency. ESG is beginning to have a meaningful impact on investment decision making.

Retail investors still rank grocery-anchored centers as their preferred capital destination. The durability of their tenancy and lower e-commerce penetration remains attractive. Redevelopment opportunities will be common, as the second investment choice is repositioning/change of use.

Hotel investors are still seeking luxury properties. This hotel segment ranked #1 this year and last. This category of the hotel market has shown strong performance with improved occupancies and record-high room rates, driving RevPAR.

Other key findings include that the top alternative asset classes are also consistent year-to-year, led by life science, data centers, and student housing. Core investors have the most negative outlook on office, as 55% expect losses for the asset type. Hotel has the lowest expected losses at 27%. Industrial (35%), retail (37%), and multifamily (38%) followed. Investors are focused on growth/tier two or three cities, well ahead of EMEA and APAC.

Investors have more capital on the sidelines than ever before, ready to jump on opportunities. Recapitalization, preferred equity, and mezzanine debt strategies are gaining traction and attention. Liquidity remains widely available, though the sources of capital have changed.

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About the 2023 Global Investor Outlook
The third edition of our annual outlook for global property investors is based on 30+ in-depth interviews with Colliers Capital Markets global and regional experts and a survey of 750+ investors between October and November 2022. The findings and opinions featured in the report are shaped by their responses.

About Colliers
Colliers (NASDAQ, TSX: CIGI) is a leading diversified professional services and investment management company. With operations in 63 countries, our 18,000 enterprising professionals work collaboratively to provide expert real estate and investment advice to clients. For more than 27 years, our experienced leadership with significant inside ownership has delivered compound annual investment returns of approximately 20% for shareholders. With annual revenues of $4.6 billion and $92 billion of assets under management, Colliers maximizes the potential of property and real assets to accelerate the success of our clients, our investors, and our people. Learn more at corporate.colliers.com, Twitter @Colliers or LinkedIn.

For Media Inquiries:
Elliot Golan
Allison+Partners
Elliot.Golan@allisonpr.com