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 July 16, 2020  

Disruption 2020: Unlocked Insights Part 3 - Cross-Border Capital

As part of Colliers’ institutional cross-border platform, we regularly collaborate and share information with a closely connected group of global capital markets leaders in the U.K., South Korea, Singapore, Japan, China, Germany and Australia, among others. Our global presence in these and some 60+ other countries provides us with vast market intelligence and relationships across the world.

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Our team has produced these key insights on cross-border capital sources:

International investors remain focused on core assets.
  • Large, core, cash-rich European funds are still seeking opportunities in the U.S., but the current travel bans have limited their ability to conduct/conclude due diligence.

  • Asia-based investors, particularly Korean and Japanese, are seeking safe-haven investments in the U.S., given ongoing uncertainty in the global markets.

  • Middle Eastern family offices and high-net-worth private capital are focused on long-term wealth preservation/passive long-term-leased credit deals.

  • Office and industrial fit the criteria well, because of their long-term leases and solid credit tenants.

  • All investors are challenged by uncertainty about underwriting, vacancy, rollover, downtime and rent assumptions.

Macro trends point to continued cross-border capital flows.
  • The Fed recently reaffirmed its policy of no rate hikes through 2022, confirming the low-interest-rate environment for a prolonged period, which will reduce hedging costs ($ vs. EUR).

  • Allocation of institutional portfolios to real estate is expected to continue growing, as traditional asset classes are affected by the long-term, low-interest-rate environment and their volatility in highly sensitive geopolitical and disruptive times.

  • Europe and parts of Asia are experiencing a quicker pace of recovery than the U.S., spurring confidence among many foreign investor groups.

  • In March, Allianz and PIMCO’s real estate management divisions were consolidated, while AXA realigned internally. Both actions were aimed at better channeling each manager’s distribution capabilities into real estate markets.

Deals are getting done.
  • We advised our client Deka on an office acquisition in Chicago that closed in May — a brand-new building with a long-term lease to a credit tenant.

  • Continued foreign appetite for core product is further evidenced by GLL’s (Germany) and Zurich Insurance Group’s (Switzerland) purchases of single-tenant long-term-leased industrial assets, which closed in April and May, respectively. Zurich also closed on a retail condo leased long-term to Whole Foods in Coral Gables, FL, one of the largest retail trades in May.

  • Deal flow remains slow but is beginning to pick up, with some new institutional offerings recently. We are seeing sellers/brokers gauging investor interest in new offerings on a quiet, off-market basis — a trend that will likely continue.

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Click below to revisit Part 1 of the series,

Macro Takeaways

CM_Unlocked Insights_macro takeaways

Click below to revisit Part 2 of the series,

Property Type Takeaways

CM_Unlocked Insights_property type takeaways

Robert Stamm, MRICS
Senior Executive Vice President

Aaron Jodka
Managing Director, Research & Client Services
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