Hines' New Global Outlook: Signals To Watch In Real Estate Investing

Report Explores Four Macrotrends Shaping the Global Landscape, Developments in Key Regions

(HOUSTON) – Hines, the global real estate investment, development, and property manager, today released its new global investment outlook titled, “Opportunistic Patience Prevails.” Informed by Hines Research, the report delivers a holistic view of current and emerging considerations for real estate investors.

Hines global chief investment officer David Steinbach introduces his view of the “Four Ds” systemically reshaping the economic, social, and real estate landscape: deleveraging, deglobalization, decarbonization and demography.

The report also explores what Hines believes are two signals of a potential recovery. The increase in transaction volume in some markets across the globe point to nascent improvement, though the U.S. recovery appears to be lagging Europe given the persistent spread between appraised capitalization (cap) rates and transaction cap rates. Additionally, by back testing the data on bank sentiment, Hines found a relationship between changes in bank lending standards and real estate investment performance. Once again, the European market in Hines observations appears to be further along in its transition with notable decreases in tightening compared to the U.S. where Q2 was the third quarter in a row with more than 60% of surveyed banks tightening underwriting standards on CRE loans.

"Our research points toward two key signals to watch in the current environment — an increase in global transactions and a link between shifts in bank lending norms and real estate performance," said David Steinbach, global chief investment officer at Hines. “This, combined with emerging macrotrends, and economic and geopolitical forces, are the factors redefining investment strategies and priorities today. While change always carries some level of risk, it is also a catalyst for meaningful long-term transformation that often leads to new sources of demand, revenue, and opportunity.” 

Hines’ regional insights reveal further distinctions between the markets:

  • Americas - While deal volume in the U.S. and Canada is at half the level before the Fed began tightening, a number of regions (e.g., East, Midwest, and Canada), may soon see widespread “buy” signals given ongoing repricing. From a sector perspective, the fundamental health of U.S. warehouse and retail markets is moderating while apartment and office fundamentals are falling sharply.
  • Europe – Positive signals in Europe are somewhat tempered by persistent cost-of-living concerns, the potential impact of demographic changes to the workforce on long-term growth, and a mixed economic outlook. In terms of real estate, despite lower transaction volumes and dips in leasing activity (aside from logistics and apartments), public market data suggests that the worst of the pricing declines may be over.
  • Asia – Despite slowing in China, Asia’s growth is still expected to outpace the globe.1 Central banks in Asia remain vigilant, but with inflation trending in the right direction, consensus expects policy rates to ease in 2024 and 2025 though the yield curve for sovereign bonds suggests that long rates in the region could stay elevated or even rise over the next five years. Markets with rising cap rates are seeing relatively healthy rent growth and sectors like retail and office are showing signs of improving fundamentals and stabilization, respectively.

“To date, real estate performance is on pace with what we predicted entering 2023,” said Josh Scoville, head of global research at Hines. “With starts increasingly decelerating, lack of new supply will be an important contributor to the ultimate recovery, potentially leading to strong rent growth once demand inevitably improves. As we head towards the confluence of better fundamentals and heightened liquidity, we expect investor patience to be rewarded with a range of lucrative new global opportunities.”

The content herein and in the report is provided for informational purposes only. Nothing above or in the report constitutes investment, legal, or tax advice or recommendations. Such content should not be relied upon as a basis for making an investment decision and is not an offer of advisory services or an offer to invest in any product or asset class. It should not be assumed that any investment in an asset class described herein will be profitable. Any projections, estimates, forecasts, targets, prospects and/or opinions expressed in these materials are subject to change without notice. Opinions or beliefs expressed in these materials may differ or be contrary to opinions expressed by others. Certain information above and in the report has been obtained from third-party sources. Hines has not independently verified such information. Back-tested results are not a guarantee of future performance.

About Hines

Hines is a global real estate investment, development, and property manager. The firm was founded by Gerald D. Hines in 1957 and now operates in 30 countries. We manage nearly $94.6B1 in high-performing assets across residential, logistics, retail, office, and mixed-use strategies. Our local teams serve 790 properties totaling nearly 269 million square feet globally. We are committed to a net zero carbon target by 2040 without buying offsets. To learn more about Hines, visit www.hines.com and follow @Hines on social media.

¹Includes both the global Hines organization and RIA AUM as of June 30, 2023.