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EXECUTIVE SUMMARY Some of the key themes from this year’s survey are:
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Investors are building on the greater risk appetite that they adopted in 2014; not only do many plan to maintain this existing high level, but a substantial share seek to increase their risk profiles further.
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Investment trends are often global, but capital remains primarily domestic; only 14% will invest more than 50% of their total real estate allocations outside their home region. That said, there is strong interest in investing abroad from Asian investors, while Australian and New Zealand investors may have to consider looking offshore as stock reduces. In the US, local investors are experiencing the other end of global investing as competition from overseas sources of capital intensifies in major cities.
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London continues to retain a special place in investors’ portfolios, along with other global gateway cities such as New York and Paris. It leads the list of investors looking for ‘safe haven’ investing. However, in line with investors’ growing risk appetite, those looking to ‘chase yield’ have started to also look at Europe and the UK regional cities.
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Debt is back as a driver in the market, supporting many investors’ aims to go higher up the risk/return spectrum. There is still a high level of interest in using debt to enhance returns, particularly for those investors looking for Internal Rate of Return (IRR) in the high teens. In markets such as the US and Asia where financing is likely to get more expensive in the next 12 to 18 months, there has not been a significant dent in the appetite for borrowing.
Although survey respondents did not indicate taxation of foreign real estate ownership (e.g. Foreign Investment in Real Property Tax Act of 1980 (FIRPTA) in the US) as a material factor when evaluating their investment alternatives, Colliers’ experience has been that this factor appears to play an important role on the clients’ investment decisions. This may reflect a lack of international awareness by survey respondents who may delegate these worries to their accountants. However, there is certainly confusion about foreign ownership tax laws in some markets, and markets that have managed to mitigate this confusion or complexity have been more successful at driving foreign investment into commercial real estate.
2015 GLOBAL INVESTMENT SENTIMENT REPORT
COLLIERS INTERNATIONAL
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