Real estate investors worldwide are painting a more optimistic picture of the market, with many convinced that the next up cycle will begin in the year ahead. That optimism is reflected by two out of three respondents to Colliers International's 2010 Global Investor Sentiment Survey who expressed a desire to expand their portfolios in the next 12 months.
Findings from the surveycompiled from 244 major institutional and private global investors with a total investment portfolio exceeding $300 billionshow that a majority of respondents believe the market is at or near bottom, and the two largest groups, equaling 41 percent of respondents, see the market between five and six o'clock on the "Global Property Clock."
The clock equates market cycles to specific times, with 12 o'clock representing the top of the market and six o'clock representing the bottom. Each six-hour period in between designates rising (after 6:00, to 12:00) or "declining" (after 12:00, to 6:00) cycles.
Respondents view Latin America (8:30) and the Pacific region (7:00) as already on the upswing. The Pacific region includes Australia and New Zealand. The U.S. and Asia (at 6:00) were viewed as at the market's bottom, while the Middle East, Eastern and Western Europe, and Canada all still were viewed as in the down part of the cycle. With the exception of Eastern Europe, respondents believe all these areas of the world will be in various stages of the "up" phase of the market in the next 12 months.
While those seeking to expand their portfolios expressed a higher comfort level in doing so in their home markets, they also saw future opportunity in several emerging markets, such as Poland, Ukraine, Vietnam, Brazil, and India.
"Investors clearly see the market resetting and about to enter the next up cycle," says Colliers' Jamie Horne. "Despite this overwhelmingly positive outlook, investors are still cautious and expressed some areas of concern."
One of those major concerns is financing. Respondents were split evenly on whether financing is more or less accessible today than it was a year ago. Their optimism, however, shined through once again when taking a look at the year ahead. Nearly 90 percent of respondents believe that financing will be easier to secure within the next 12 months.
Investors from Asia, Canada, Latin America, and Western Europe indicated an improvement in access to financing over the last year, while those in the U.S. and the Pacific saw no change. Investors in the Middle East and Eastern Europe saw less availability to financing.
Another theme running through the survey was a shifting preference towards high-quality and income-producing properties. The move back towards income and less emphasis on capital appreciation was best captured by the sentiment from one survey respondent who said, "capital gains are just a bonus; we buy property for income."
On the capital markets side, the survey results also revealed a considerable divergence of opinion regarding the market's return to "normal" (defined as 7.0 percent to 7.5 percent capitalization rates for office properties), although most respondents anticipate that their respective markets will return to normal within the next 18 months.
On a geographic basis, investors from Asia and the Pacific expect their markets to return to normal by the fourth quarter of 2010, followed by those in Canada, Latin America, Eastern Europe, and Western Europe by the first quarter of 2011, and those in the U.S. by the second quarter of 2011.
Another important conclusion to be drawn from the survey is the perception of how the market has changed structurally, says Ross Moore, another Colliers' executive and director of its market and economic research.
"Many investors expressed the view that real estate cycles are now shorter and more severe than historical norms, which serves as a warning to others that going forward, market participants will need to be more nimble. Access to current and insightful analysis will be more important than ever," Moore concludes.
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