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The $2 trillion global real estate market is really a local business, says Jon Cheigh, head of global real estate at Cohen & Steers in New York.

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His firm, which manages the Renaissance Global Real Estate Fund, focuses on supply-and-demand fundamentals in individual markets and identifies where there are attractive mispricings and valuations.

In a Jan. 18 interview, Cheigh broke down opportunities in four major markets.

The U.S.

Investors should look to three sectors in the U.S., Cheigh said: data centres, industrial and residential.

Data centres and industrial benefit from secular technology trends, he said. As e-commerce continues to grow, products need to move through warehouses, creating demand for industrial real estate.

“In the case of data centres, with the amount of data traffic that continues to increase, whether it’s companies moving to the cloud or all of us uploading more photos or watching more YouTube, all that has translated into very strong demand growth—and, as a result, rental growth,” he said.

The apartment rental space also offers opportunities, Cheigh said. More than a decade after the U.S. housing bubble burst, real estate builders continue to be cautious.

“So what we see is that the U.S. has become under-housed because we’re not building enough new housing,” he said. “What that means for owners and operators of rental apartments is that they have pricing power—they are able to increase their rents. So we see very good opportunity within the urban apartment rental space.”


Despite the International Monetary Fund’s (IMF) forecast for only 0.9% growth this year, Japan’s real estate market has strong fundamentals, Cheigh said.

Vacancy rates in the Tokyo office market have declined over the last five years, Cheigh said, and are now at their lowest in a decade.

“Given very little new supply and new tenants scrambling to find space, office rents are growing around 5% to 6%,” he said.

Low vacancy and healthy demand make the Tokyo office space a good investment opportunity, Cheigh said—specifically company stocks for Japanese developers as well as Japanese REITs.


Cheigh also said there are good fundamentals in the office and warehouse sectors down under.

The Sydney office market has “negative amounts of new supply,” he said, with office buildings being turned into residential and other types of units.

As a result, there’s been double-digit rental growth over the last couple of years. “While that has slowed down from double digits to mid-single digits, the Sydney office market is still a market that is doing well,” he said.

Meanwhile, growth in e-commerce has strengthened Australia’s warehouse sector. Amazon only began its Australia-domiciled business in the last year-and-a-half, he said.

“With the emergence of Amazon and our expectation that e-commerce growth rates are going to accelerate in Australia, we would expect that the phenomenon that we’ve seen globally of very strong warehouse rental growth will then also happen in Australia.”

The U.K.

With the IMF estimating a tepid 1.5% GDP growth this year, and Brexit looming, investors may expect economic factors to negatively impact all sectors in the U.K. And while that might be true for the office and residential markets, Cheigh said that student housing is expected to see strong demand. The market will benefit due to a depreciating pound, compared to the euro or Asian currencies.

“It’s become more attractive for EU students, [as well as] students in Asia to do university within the U.K.,” he said.

With an influx of global students, the U.K.’s student housing market will grow, and “represent very good investment opportunities.”

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