real estate capital flows: global deck

REAL ESTATE CAPITAL FLOWS: GLOBAL DECKQ1 2021

Richard BarkhamGlobal Chief Economist & Head of Americas Research+1 617 912 [email protected]

Wei LuoAssociate Director, Global Capital Markets Research+1 212 984 [email protected]

Daniel ChangResearch Analyst, Global Capital Markets Research+1 617 912 [email protected]

mailto:%[email protected]

mailto:[email protected]


2 GLOBAL RESEARCH | REAL ESTATE CAPITAL FLOWS Q1 2021CBRE

0

200

400

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800

1,000

1,200

1,400

020406080

100120140160180200

2012

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Q1

Americas EMEA APAC Rolling 12-month total (rhs)

REAL ESTATE INVESTMENT: GLOBAL QUARTERLY TOTALS

USD Billion, Floating Exchange Rates (Average Quarterly FX Rates)

Source: CBRE Research, Real Capital Analytics (for Americas), Q1 2021.


0

200

400

600

800

1,000

1,200

1,400

020406080

100120140160180200

2012

Q1

2012

Q2

2012

Q3

2012

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2013

Q1

2013

Q2

2013

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2013

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2014

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2014

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Q1

Americas EMEA APAC Rolling 12-month total (rhs)

USD Billion, Fixed Exchange Rates (Constant FX Rates of Q1 2021)

REAL ESTATE INVESTMENT: GLOBAL QUARTERLY TOTALS



USD Billion, Fixed Exchange Rates (Constant FX Rates of Q1 2021)

SEASONALLY ADJUSTED GLOBAL QUARTERLY TOTALS


0

50

100

150

200

250

300

350

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Global

Americas

EMEA

APAC

5

DESTINATION OF CROSS-REGIONAL CAPITAL FLOWS BY BUYER ORIGINSYEAR ENDING IN Q1 2021

6.87.4

3.0

0.1

0.3

33.0

10.4

4.0 11.1

2.5

4.0

0.3

NORTH AMERICA

SOUTH AMERICA

AFRICA

MIDDLE EAST

EUROPE

Buyer Origin with Corresponding Bubble Colour

Total Outbound (USD bn)

Change TTM Y/Y

Asia 21.2 34%

Africa 0.3 84%

Europe 10.8 41%

Middle East 7.2 65%

North America 44.4 34%

Pacific 1.0 58%

South America 0.1 72%

PACIFIC

ASIA

0.8

Each bubble represents a total international capital inflow from another region, identified in seven colours, in USD billions. Transactions exclude development sites. Source: CBRE Research & RCA (Americas), Q1 2021.

0.8

0.2

0.2


0

5

10

15

20

25

30

35

0

50

100

150

200

250

300

350

400

2011

Q1

2011

Q2

2011

Q3

2011

Q4

2012

Q1

2012

Q2

2012

Q3

2012

Q4

2013

Q1

2013

Q2

2013

Q3

2013

Q4

2014

Q1

2014

Q2

2014

Q3

2014

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2015

Q1

2015

Q2

2015

Q3

2015

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2016

Q1

2016

Q2

2016

Q3

2016

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2017

Q1

2017

Q2

2017

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2017

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2018

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2018

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2018

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2018

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2019

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2019

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2019

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2020

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2020

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2020

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2021

Q1

Domestic Purchasers Intra-Regional Purchasers Cross-Regional Purchasers % Cross-Border (rhs)

GLOBAL DOMESTIC VS. CROSS-BORDER CRE INVESTMENT


USD Billion, Floating Exchange Rates Percent of Total


0 1 2 3 4 5 6 7 8 9

AustinChicago

Washington DCShanghai

SeoulHouston

BerlinSeattleLondonBeijing

Miami/South FloridaTokyo

AtlantaParis (IDF)

PhoenixDallas

New YorkSan Francisco

BostonLos Angeles

MAIN DESTINATIONS: TOP CITIES/METROS (Q1 2021)


0 0.5 1 1.5 2

New YorkNagoyaMadrid

Los AngelesAtlanta

BarcelonaHong Kong

San FranciscoDallas

HelsinkiSydney

ShanghaiSingapore

DublinMilanBerlinTokyo

CopenhagenParis (IDF)

London

Total Investment Activity, USD Billions Cross-Border Investment Activity, USD Billions


0 5 10 15 20 25 30 35

FrankfurtShanghai

DenverBeijing

ChicagoMiami/South Florida

BerlinSeattleTokyo

PhoenixWashington DC

SeoulAtlantaLondonBostonDallas

San FranciscoParis (IDF)

New YorkLos Angeles

MAIN DESTINATIONS: TOP CITIES/METROS (YEAR ENDING IN Q1 2021)


0 2 4 6 8 10 12

HelsinkiAtlantaMunichSeattleVienna

New YorkTokyo

San FranciscoMilan

HamburgSingapore

AmsterdamMadrid

CopenhagenDublinSydney

FrankfurtBerlin

Paris (IDF)London

Total Investment Activity, USD Billions Cross-Border Investment Activity, USD Billions


0

5

10

15

20

25

30

London Paris (IDF) New York Berlin Frankfurt Shanghai Hong Kong Los Angeles

2016 2017 2018 2019 2020

TOP MARKETS FOR FOREIGN INVESTMENT


USD Billion, Floating Exchange Rates


0

50

100

150

200

250

300

350

400

2011

Q1

2011

Q2

2011

Q3

2011

Q4

2012

Q1

2012

Q2

2012

Q3

2012

Q4

2013

Q1

2013

Q2

2013

Q3

2013

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2014

Q1

2014

Q2

2014

Q3

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2015

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2015

Q2

2015

Q3

2015

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2016

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2016

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2016

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2017

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2018

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2019

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2019

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Q1

2020

Q2

2020

Q3

2020

Q4

2021

Q1

Office Retail Industrial Multifamily Hotel Other

GLOBAL CRE INVESTMENT BY SECTOR


USD Billion, Floating Exchange Rates


-4

-2

0

2

4

6

8

10

12

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

Spread Global all-property yield Global bond rate

GLOBAL PROPERTY YIELD AND GLOBAL BOND RATE SPREAD

Source: CBRE Research, National Sources & Macrobond, Q1 2021.

All-Property Yield (Average) and Bond Rate (End of Period), Quarterly, Percent


4.1

5.0

4.2

3

4

5

6

7

8

9

10

11

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

Global Office Yield Global Retail Yield Global Industrial Yield

GLOBAL COMPOSITE YIELD BY SECTORS

Source: CBRE Research, Q1 2021.

Quarterly Average, Percent


4.6

3.74.1

3

4

4

5

5

6

6

7

7

8

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

North America Europe APAC

PRIME OFFICE YIELD (NET) BY REGION


Top 10 Market Average in Each Region, End of Period, Quarterly, Percent


5.35.4

4.3

3

4

4

5

5

6

6

7

7

8

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021


PRIME RETAIL YIELD (NET) BY REGION




3.9

4.54.3

3

4

5

6

7

8

9

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021


PRIME INDUSTRIAL YIELD (NET) BY REGION




-4

-2

0

2

4

6

Shen

zhen

Beijin

g

Hong

Kon

g

Shan

ghai

Singa

pore

Los A

ngele

s

Seou

l

New

York

Bosto

n

Lond

on

Toro

nto

San F

ranc

isco

Paris

Toky

o

Sydn

ey

Madr

id

Berli

n

Wash

ingto

n D.C.

Melbo

urne

Amste

rdam

Dalla

s

Cope

nhag

en

Chica

go

Brus

sels

Prime Office Yield 10-year Government Bond Spread

REAL ESTATE SPREADS OVER GOVERNMENT BONDS SELECTED GLOBAL CITIES

Source: CBRE Research, National Sources & Macrobond, Q1 2021.Note: 10-Year Bond Rates are shown as an additive inverse.

Americas Markets

Asian Markets

Pacific Markets

EMEA Markets

Prime Office Yield (net) relative to local 10-year Government Bond Rate, Percent


-4

-2

0

2

4

6

8

Los A

ngele

s

New

York

Toro

nto

Bosto

n

San F

ranc

isco

Wash

ingto

n D.C.

Dalla

s

Denv

er

Chica

go

New

York

San F

ranc

isco

Seat

tle

Los A

ngele

s

Toro

nto

Miam

i

Wash

ingto

n D.C.

Bosto

n

Phila

delph

ia

Vanc

ouve

r

New

York

San F

ranc

isco

Seat

tle

Los A

ngele

s

Toro

nto

Miam

i

Atlan

ta

Chica

go

Prime Yield Bond Rate Spread

REAL ESTATE SPREADS OVER GOVERNMENT BONDS AMERICAS CITIES


OFFICE INDUSTRIALRETAIL


-2

0

2

4

6

8

Milan

Lond

on

Paris

Munic

h

Berli

n

Madr

id

Amste

rdam

Cope

nhag

en

Brus

sels

Paris

Vien

na

Zuric

h

Berli

n

Fran

kfurt

am M

ain

Rome

Amste

rdam

Milan

Lond

on

Lond

on

Manc

heste

r/Live

rpoo

l

Paris

Stock

holm

Fran

kfurt

am M

ain

Hamb

urg

Munic

h


REAL ESTATE SPREADS OVER GOVERNMENT BONDS EMEA CITIES




-4

-2

0

2

4

6

Shen

zhen

Beijin

g

Hong

Kon

g

Shan

ghai

Singa

pore

Seou

l

Toky

o

Sydn

ey

Melbo

urne

Shen

zhen

Beijin

g

Guan

gzho

u

Shan

ghai

Hong

Kon

g

Toky

o

Singa

pore

Sydn

ey

Melbo

urne

Singa

pore

Beijin

g

Shan

ghai

Hong

Kon

g

Auck

land

Sydn

ey

Melbo

urne

Toky

o

Perth


REAL ESTATE SPREADS OVER GOVERNMENT BONDS APAC CITIES




PRIME OFFICE YIELDS AND CYCLICAL RANGES

0

2

4

6

8

10

12

14

Dalla

s

Seou

l

Milan

Brus

sels

Paris

Munic

h

Berli

n

Los A

ngele

s

Toro

nto

Toky

o

Brisb

ane

Amste

rdam

Madr

id

Cope

nhag

en

Lond

on

Sydn

ey

Melbo

urne

Beijin

g

Bosto

n

Hong

Kon

g

Shen

zhen

Denv

er

Wash

ingto

n D.C.

Singa

pore

New

York

San F

ranc

isco

Atlan

ta

Shan

ghai

Chica

go

Mosco

w

Current Yield Cyclical Low Cyclical High

Current Prime Office Yield (net) relative to Cyclical High and Low, Percent

At cyclical lowBelow cyclical low

Source: CBRE Research, Q1 2021.Note: Last cycle as from Q3 2008 to Q4 2019.

Above cyclical low


GLOBAL REAL ESTATE INCOME AND CAPITAL RETURNS

Source: CBRE Research & MSCI/IPD, Q1 2021.

Real Estate Investment Returns, All Property Types, Fixed Exchange Rates, Percent

-15

-10

-5

0

5

10

15

20

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020E 2021F

Capital Growth Income Return Total Return


INVESTMENT AND OPERATING STRATEGY

Primary Investment Strategy COVID’s Impact on Operating Strategy

Source: CBRE Global Investor Intentions Survey, 2021.

34%25% 27%

16% 21% 23%

17%25%

28%

31% 28% 25%

35% 34%31%

33% 36%29%

11% 14% 12%14%

15%17%

3% 3% 2% 6% 1% 7%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2016 2017 2018 2019 2020 2021

Core Core plus Value-add Opportunistic Distressed

16%

23%

24%

34%

49%

56%

Introduction of flexible space in officeassets

More interest in decentralised locations

Elevated interest in assets withredevelopment potential

Greater consideration of environmental,social and governance (ESG) issues

Stronger focus on long-termdemographic and technological trends

Greater emphasis on tenant credit andrent roll growth


4% 6%

11%

24%

21%

34%

3% 5%

9%

22%

22%

39%

4%6%

10%

23%

22%

35%

4%6%

11%

22%

22%

35%

41%

17%

16%

16%

6%4%

37%

16%

16%

17%

8%6%

38%

18%

16%

16%

7%5%

37%

18%

17%

16%

7%5%

>=$100M>=$50M, <$100M>=$25M, <$50M>=$10M, <25$M>=$5M, <$10M< $5M

DEAL SIZE LARGELY UNCHANGED IN THE PANDEMIC

Percent by Total Volume Percent by Deal Counts

2010

2015

2019Year Endingin Q1 2021


ARCHIVE

25

DESTINATION OF CROSS-REGIONAL CAPITAL FLOWS BY BUYER ORIGINSFY 2020

7.38.4

2.6

0.06

0.9

37.7

11.1 11.6

10.42.7

3.8

NORTH AMERICA

SOUTH AMERICA

AFRICA

MIDDLE EAST

EUROPE



Change from 2019

Asia 22.2 26%

Africa 0.9 31%

Europe 12.2 31%

Middle East 14.5 6%


Pacific 0.7 73%


PACIFIC

ASIA

Each bubble represents a total international capital inflow from another region, identified in seven colours, in USD billions. Transactions exclude development sites. Source: CBRE Research & RCA (Americas), Q1 2021.

0.2

0.080.6

0.09

1.1

0.08

0.07




Change from 2018

Asia 30.3 33%

Africa 1.3 53%

Europe 17.8 25%

Middle East 13.7 4%


Pacific 2.5 80%


7.812.4

6.1

1.30.3

0.4

0.3

1.3

48.619.6

7.41.3

9.74.0

0.1

2.8

0.51.2

NORTH AMERICA

SOUTH AMERICAAFRICA

MIDDLE EAST

EUROPE

PACIFIC

ASIA

DESTINATION OF CROSS-REGIONAL CAPITAL FLOWS BY BUYER ORIGINSFY 2019

Each bubble represents a total international capital inflow from another region, identified in seven colours, in USD billions. Transactions exclude development sites. Source: CBRE Research & Real Capital Analytics, 2020.

0.06

0.08

0.5


APPENDIX | DEFINITIONS

Currency Conversion

The transaction prices are recorded in 76 different local currencies in CBRE’s database. They are converted to USD (U.S. Dollar) for global comparison based on two methods:

- Floating exchange rates: Non-USD prices are converted using the average per-USD exchange rate of each corresponding quarter. For instance, a transaction in Q4 2017 will be converted using the average quarterly exchange rate of Q4 2017.

- Fixed exchange rates: Non-USD prices are converted using the end-of-quarter per-USD exchange rate of the latest quarter. For instance, all transactions in this document are converted using the end-of-quarter exchange rate of Q3 2018.

If not specified, currencies are converted using floating exchange rates in this document.

Regions and Cross-Regional

There are seven identified regions in this document: Asia, Africa, Europe, Middle East, North America, Pacific and South America.

- Intra-Regional: Cross-border purchaser from another country in the same region.

- Cross-regional: Cross-border purchaser from another country in a different region.

Global All-Property Yield

A weighted composite of office, retail and industrial average prime yields of fifty selected global cities. Prime yield is calculated as NOI divided by the total acquisition cost (purchase price and purchase costs), which an investor would expect to receive in the first year when acquiring a Class A/A+ office building in a prime location, assuming the property is fully let at current market value rents. Please note in the Americas, the yield is more commonly known as cap rate, based on stabilized properties with vacancy levels close to market averages.


APPENDIX | DEFINITIONS CONT.

Global Bond Rate

Defined as a quarterly average of 10-year government bonds, in end-of-period values, of twenty-two selected countries.

Composite Yield – Office, Retail, Industrial

The prime yield of each sector is calculated as NOI (Net Operating Income) divided by the total acquisition cost (purchase price and purchase costs), which an investor would expect to receive in the first year when acquiring a Class A/A+ office/retail/industrial building in a prime location, assuming the property is fully let at current market value rents. Please note in the Americas, the yield is more commonly known as cap rate, based on stabilized properties with vacancy levels close to market averages.

Real Estate Spread over Government Bond

The difference between the prime all-property yield, as defined earlier, of a market/city and the corresponding 10-year government bond rate in that country.

Real Estate Investment Return

The real estate industry has multiple ways of calculating total investment return, a widely used valuation and performance measurement. CBRE and MSCI generally agrees with GIPS’s (Global Investment Performance Standard) methodology, which indicates:

Total return = capital growth + income return

Capital growth represents the change in property value relative to the capital employed;

Income return is defined as income receivable net of nonrecoverable expenditures as a percentage of the capital employed.

Disclaimer: Information contained herein, including projections, has been obtained from sources believed to be reliable. While we do not doubt its accuracy, we have not verified it and make no guarantee, warranty or representation about it. It is your responsibility to confirm independently its accuracy and completeness. This information is presented exclusively for use by CBRE clients and professionals and all rights to the material are reserved and cannot be reproduced without prior written permission of CBRE.© Copyright 2021 CBRE

Richard BarkhamGlobal Chief Economist & Head of Americas Research+1 617 912 [email protected]

Wei LuoAssociate Director, Global Capital Markets Research+1 212 984 [email protected]

Daniel ChangResearch Analyst, Global Capital Markets Research+1 617 912 [email protected]

mailto:%[email protected]



real estate capital flows: global deck

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