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THINK Global: Weighing up trends, cycles and shocks in 2016

THINK Global

In our latest research report, we give a top-down view on the cycles and trends in commercial real estate in the US, Europe and Asia-Pacific so far this year. Based on our analysis of each region in a global context and using megatrend measurements, we provide predictions for H2 2016.

Investing in property can be challenging at times, largely because performance is affected by a wide swath of factors. At its most basic, successful property investing requires selecting individual properties that will perform well, based on the characteristics of the bricks and mortar along with the micro-location. But that’s not enough. The next consideration is the location of the property within its city and/or metropolitan area. This larger context helps to evaluate the strength of economic and demographic growth in relation to the area’s real estate cycle. The next layer is an overlay of national factors, including cyclical items such as the paths of economic growth, interest rates, and government fiscal policy, all within each country’s specific political and legal environment.

Furthermore, longer-term trends affect all layers of property investment analysis. Our work has identified five megatrends that are powerful influences on global activity today and are expected to remain so over the years ahead. They include urbanisation, ageing population, growth in the global middle class, shift of economic power towards the East, and global interconnectedness. The power of these megatrends on property markets is most apparent over long periods of time, rather than from year-to-year. Shorter time frames overlay economic and property market cycles, which may either inflate or deflate the influence of trends.

Cycle and trend factors determine the investing environment and performance prospects for property portfolios. Cycles influence short-term conditions, such as the economic growth and job creation that generate demand for space, or the level of interest rates and credit market conditions that influence construction activity and investor appetite for property, which determine the relative short-term attractiveness of property across geographies. Trends influence long-term conditions, particularly the durability of economic growth and job creation, and the potential for geographic rearrangement of those prospects that will produce tomorrow’s investment opportunities.

Download the report