Across the economic landscape since the demise of Lehman Brothers in 2008, occasional signs of improvement in the global economies in recent years have contrasted with equally frequent setbacks and new challenges to market stability. With the hindsight of these last few years, the outlook for 2012 appears particularly cloudy, no matter the asset class or industry. Market volatility is pervasive across listed stock and equity markets, and it is macro events, rather than economic fundamentals, that are driving market sentiment. In fact, one pundit characterized the outlook for the forthcoming year as a “crapshoot.”
When the macro-economic and political landscape is so uncertain, it is inevitable that the outlook for real estate will in many ways be equally unclear. Yet that very uncertainty suggests that some features in the property market are likely to persist into 2012:
Corporate occupiers will continue to exercise caution in their decisions, and demand will remain moderate. Investors in the West will therefore tend to adopt more defensive strategies, focusing on high-quality buildings in prime locations within the most liquid and transparent markets. Demand for such investments should remain healthy, and prime real estate should therefore perform well relative to other asset classes.
Value-add strategies are more directly dependent on the economy’s growth or recovery, and are therefore likely to be less popular in this environment. As a result, secondary property will continue to underperform.
Previously, the stronger economic prospects for Asia meant that investors there have been more aggressive. But with growth starting to slow in China and concerns arising over the broader global impact of a Western slowdown, occupiers and investors are also becoming more cautious in many markets across Asia.
Source : CBRE