Over the last five years or so, many Commercial Real Estate (CRE) investors have favoured income producing, stable assets in main locations. Targeting investments in the most liquid real estate markets, often in larger cities, has been the preferred strategy.
During this period, competition for assets has led to falling yields in most markets, while, in some markets, yields have breached pre-recession lows. However, with lesser yield falls and relatively moderate (forecast to be sub 3%1 p.a.) rental value growth expected, there is now a desire among many investors to move up the risk curve in the search of higher returns. This is leading to growing demand for value-add investments. 2014 was the most successful year for value-add fundraising for six years, as, in aggregate, 90 value-add funds secured USD27bn2, compared to 2008, when
103 funds secured USD31bn.
Source : AXA Real Estate