Following 2022’s turbulence, global opportunities for real estate investors will abound this year due to repricing, continued outperformance of high-quality office assets and deflation in some key sectors. That’s the top-line assessment of Hines in its 2023: Navigating the Labyrinth outlook report. 

“In a period of global economic discord, transaction volume will be unlocked with debt availability and the reset of pricing levels more in line with expected fundamentals,” said David Steinbach, global CIO at Hines. “Successful acquisitions and developments in the new year will also focus on high quality assets that meet customer demands for simplicity and flexibility. We expect to see more accretive opportunities emerge in 2023.” 

On a sector-by-sector basis, Hines sees varying opportunities across the Americas, Asia and Europe, as well as differences in terms of market cycle among these regions. Here’s a rundown: 

• Industrial: Although industrial fundamentals are still strong in most Americas markets, Hines says demand will drop if discretionary consumer spending is negatively impacted by the downturn. In Asia, meanwhile, demand for logistics space remains strong to address e-commerce demand, and there is a need for more cold-storage facilities. For European investors, the focus is expected to return to individual assets and location quality. 

• Office: With the full impact of hybrid schedules not yet fully absorbed, continued caution is warranted for Americas investors. Flight to quality will remain evident in new development performance. Although Asia hasn’t been hit as hard by working from home or hybrid schedules, attracting new tenants to office spaces will require a new creative dimension of user experience. In Europe, occupiers seek a path to net zero. This means a smaller pool of viable assets, yet it points to a focus on newer, prime buildings. 

• Living: Careful submarket selection is paramount, because some Americas markets are oversupplied, and affordability ratios are elevated, Hines says. Secondary and tertiary markets may provide outsized opportunities arising from migration trends, and there is continued demand for larger units, activated green spaces and single-family rentals. In Asia, rental demand continues to grow in markets where homes have become increasingly unaffordable; this includes developed markets like Australia, Korea and Japan. Mainstream residential is losing its appeal across Europe as yields tighten and heightened regulation (e.g., Ireland, Netherlands, Germany) has restricted rental growth. However, niche product types such as senior living, student housing and serviced apartments remain attractive. 

• Retail: In the Americas, compelling opportunities are emerging to redevelop dated retail for the highest and best use, such as grocery-anchored, lifestyle and open-air service-oriented retail offerings and last-mile logistics. Looking at Asia, yields for retail assets have been attractive relative to other property sectors and increased stability in retail fundamentals is expected to continue. For European retail, performance has been better than expected. Negative sentiment has resulted in attractive pricing; however, new economic headwinds and uncertainty will delay a quick sector rebound as consumer confidence continues to recede. 

On a regional basis, the overall outlook varies as well. Hines sees Americas investors still recalibrating their portfolios and tenants continuing to pause on new activity as they review their growth plans for the year ahead. The second half of 2023 will bring opportunities, though. 

Meanwhile, against the backdrop of 2022’s macroeconomic and political headlines, the rebalancing of real estate product types has largely played out in Asia. Trends have indicated that the real estate industry’s main sectors may converge further. 

In Europe, the “beds and sheds revolution” of recent years has played out, Hines says. “There is no longer a standout winning sector. Our ability to understand nuances of quality within a product type has become more important than just picking the right general bucket.”