Global Quarterly | November 2023

We are pleased to share the latest issue of Ferguson Partners' Global Quarterly newsletter, highlighting key transactions, people moves and industry trends impacting the global real assets industries across North America, Europe, and Asia Pacific.

During the third quarter of 2023, we have observed a continued global economic recovery slowing amid volatility. Geopolitical headwinds persist as we navigate the post-pandemic transition. Capital markets face challenges from elevated interest rates and hesitancy regarding valuations. With rates expected to remain higher for an extended period, the cost and availability of capital have emerged as key concerns. The next 12 months are anticipated to mark a significant transition, albeit with growing regional divergences. Real estate firms are adapting to the evolving environment, realigning as necessary, and preparing for new opportunities as conditions permit.

This new reality undoubtedly impacts various sectors of the economy; however, it's evident that some sectors and regions are more affected than others. The global commercial office sector continues to face challenges, with significant concerns about price discovery amid further cap rate expansion. The adjustment to this post-COVID world is still underway, and it's apparent that, despite a consistent push to return to the office, workplace flexibility is here to stay. The full impact is still being assessed. On a positive note, logistics remains a sought-after asset class. While capitalization rates have shifted to reflect cash and bond yields, many regions still experience an optimistic story of rental growth. Similarly, opportunities are emerging in the 'living sector,' encompassing multi-family, student accommodation, and affordable housing. This global challenge is being addressed in both the public and private sectors, with a particular focus in the UK and Australia.

Looking ahead, there is an expectation that markets in many areas will remain sluggish into 2024, although there is optimism that new opportunities will arise with the entry of distressed sellers into the market. Japan remains a notable outlier, with its markets remaining relatively robust. Hospitality continues to benefit from increased domestic and international travel, and we observe a sustained interest in emerging investment classes such as life sciences, data centers, and alternatives with operational upside. Concurrently, we see the lines blurring between real estate and infrastructure.

Undoubtedly, as we enter 2024, there will be a heightened focus on risk mitigation, balance sheet and organizational repair, all viewed through the lens of sustainability. Global regulatory requirements are evolving, accelerating the need for solutions in building and operating assets within tighter ESG metrics.

Please enjoy this issue of our Global Quarterly newsletter. As always, we are available to discuss the challenges you are facing and the talent that can help your organizations identify and take advantage of the imminent opportunities.

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