The real estate trends that shaped 2015

 —  Article by JLL Staff Reporter

Developing trends, economic growth stories and new innovations have all played a part in shaping the global real estate industry in 2015.

As it draws to a close we ask JLL experts from around the world for their highlights of the past 12 months and the implications of these both within real estate and the wider business world.

From the growing strength of Chinese companies to rising investor interest in emerging batch of New World Cities to new construction materials with huge potential for our future towers, click through the slides above for a snapshot of the standout real estate trends and developments of 2015.

For more on the top stories from this year, read the Real Views Review of 2015.

Investors look beyond emerging markets
Jeremy Kelly, Director, Global Research, JLL

“We’ve seen emerging markets partly fall out of favour in 2015, with investors spooked by China’s equity market correction, the effects of lower commodity prices on many emerging economies and the potential negative impact of rising US interest rates on foreign exchange rates in emerging markets. As such, we’ve seen direct commercial real estate investment into emerging markets (excluding China) fall by a third in the first three quarters of 2015 from 2014 levels.

“But when we start to unpick the dynamics, we’re seeing a greater divergence in the real estate performance of emerging cities. The more agile emerging cities and those that are successfully transitioning to higher-value business services and IT are bucking the trend – I’m thinking of places like Shanghai and Shenzhen in China, and Bangalore and Hyderabad in India.

“Nevertheless, investors still have an appetite for risk, and so they’re targeting secondary and tertiary cities in the mature economies – with strong interest in smaller New World Cities like Munich, Stockholm, Austin, Seattle, Melbourne and Auckland.”
Building a better workplace experience
Bernice Boucher, Managing Director – Workplace Strategy, JLL

“2015 will be remembered as the year focus clearly shifted to leveraging the workplace for talent attraction, retention, productivity and engagement. This shift transcended markets, regions, sectors and industries. The war for talent, changing generational demographics and technology has driven the ever-broadening value proposition that the workplace provides when it is well-aligned with an organization’s goals and objectives.

It’s been rewarding to see more organizations making informed decisions about the nature of the workplace environment, giving employees certain choices around where and when to work, giving them the permissions they need to do their jobs, and more. When organizations focus on improving the experience of work and on overall wellbeing and engagement, they drive productivity and greater bottom-line benefit to the organization.”
Hotels become a core asset class
Matthew Richards, Director - International Capital Group, JLL

“The dominant theme in the hotel business this year has been the sheer volume of money that has poured into the sector. More and more investors are targeting hotels as a core investible asset class and, in particular, we’ve seen increasing flows from U.S.-based private equity firms. Though plenty of headlines have focused on large acquisitions by Chinese insurers, the reality is that investment activity from these groups is still in its infancy. We do anticipate more interest from Asian capital but we’ve only really witnessed the tip of the iceberg.

“Brand growth and consolidation has been another key theme in 2015, culminating in the brand merger announcements towards the back end of the year. 2016 looks set to be a year of further consolidation as operators seek scale and focus on driving market share.
India reaffirms its growth credentials
Anuj Puri, Chairman and Country Head, JLL India

India has come a long way from being in the ‘Fragile Five’ group of economies to currently being the fastest-growing economy, taking over the mantle from China. Among the original four BRIC countries – Brazil, Russia, India and China – all but India have begun to run low on fuel for growth amid a worldwide slump in commodity prices and sluggish gains in the West.

Government initiatives and reforms and Prime Minister Narendra Modi’s foreign jaunts have helped to improve India’s economic and political standing. In real estate, the private equity investments coming to India have shown a remarkable rise. It is an underserved economy in terms of real estate requirements. The world, today, sees India as a land of opportunity for trade and commerce or investments.
The rise of China’s globally competitive giants
KK Fung, Managing Director, Greater China, JLL

In 2015, 106 Chinese companies made it onto the Fortune 500 List, compared to 18 in 2005 and 54 in 2010. As their growth story continues, Chinese firms have become the largest source of office demand in the country, especially in cities like Shanghai, where multi-national corporations used to dominate the leasing market.

Globally, Chinese companies and Chinese capital stepped up their overseas real estate investment despite moderating economic growth at home. In the commercial real estate sector, outbound investment into direct real estate climbed 46 percent year-on-year to US$16.5 billion in 2014 and JLL is expecting China’s outbound real estate investment to rise further to approximately US$20 billion by the end of this year as Chinese investors continue to pursue trophy assets in many of the world’s biggest cities.
2015 Highlight 
David Green Morgan, Global Capital Markets Research Director, JLL

The retail deal in Shanghai involving Ivanhoe Cambridge from Canada and Dutch group APG buying into Chongbang, the Shanghai-based retail specialist, really stood out. Not only does it show how global the market is at the moment, it shows that institutional capital is prepared to look at all sorts of vehicles to get opportunities. This was the second institutional capital raising for Chongbang. This deal also reiterates the recurring themes that underpin China’s growth story: rapid urbanisation, growing disposable incomes and continued domestic consumption.
Private sector takes on sustainability challenge
Alex Edds, UK Head of Sustainability at JLL

In the UK there’s no clear vision or policy to support UK businesses as they transition to the low carbon economy. However, this year we’ve seen private sector leaders emerge and take on this challenge. A perfect example of this is the British Land redevelopment of Canada Water which integrates sustainability throughout.

The movement isn’t because of any philanthropic agenda, but a real recognition that things need to change, and that the status quo poses real risks to business in the future. This is likely to continue, at least until the next government, so we can expect more pressure from clients to support them realise their sustainability ambitions.
The rise of new construction material
Franz Jenowein, Sustainability Consulting Director, JLL

Construction is a notoriously slow moving industry when we look at its innovation record over the past decades. However, one trend which really came to the fore in 2015 may improve that image -the increased use of structural timber in medium tall buildings. In a current development in London’s East End a seven-storey, cross-laminated timber (CLT) mixed-use building is rising into the sky. A key feature of this 120 residential unit project is its construction time to completion that will be cut by 8 months compared to a similar structure made of concrete and steel that would have taken two-and –a-half years. CLT is also up to four times lighter than reinforced concrete and up to 70 percent less of the material is required in the foundations of a building compared to traditional concrete. The Dalston Lane building is currently the largest CLT project in the UK and several hundred of these engineered timber structures have been built or are being constructed across the country.
Real estate trends

China was the stand out for the region in 2015
Jane Murray, Head of Research Asia Pacific

''We heard a lot this year about how China’s economy is slowing - but what has been just as interesting is how the country’s changing growth drivers are impacting the property market both at home and abroad. China has made significant progress rebalancing its economy. An important sign of this rebalancing is the growth of the services sector, which is now much bigger and growing at a much faster rate than its manufacturing sector.

“As China moves to a more service-based economy, we are seeing Chinese corporates – particularly in the finance and tech sectors – take up large amounts of office space. Increasing wealth levels are driving retail sales at home and also abroad as Chinese tourists spend up big. Meanwhile, Chinese investors have been making their mark on the investment scene, snapping up not only commercial property but also residential real estate in the world’s major safe haven markets.”

Real estate trends
Read more of this article