Corporate overview

CBRE Investment Management is a leading global real assets investment management firm with $142.5bn in assets under management as of 30 June 2024, operating in more than 30 offices in 20 countries around the world. Through its investor-operator culture, the firm seeks to deliver sustainable investment solutions across real assets categories, geographies, risk profiles and execution formats so that its clients, people and communities thrive.

Investment principles & strategy

CBRE Investment Management’s investment philosophy is to deliver superior performance by applying the firm’s knowledge advantage through a disciplined investment process. The firm’s investment philosophy is founded on the following principles: 

Risk must be understood before it can be managed 

  • A rigorous risk framework for each mandate is formulated and then portfolios that will meet the firm’s clients’ risk/return requirements are carefully constructed. 

Market conditions change 

  • By combining a global view of capital markets with an in-depth insight into local asset fundamentals, the firm invests in the markets and strategies that offer the best relative value at different stages of the cycle.

Every asset is unique 

  • The firm utilises its local information networks to understand the drivers and risks of the future cash flow of an asset, enabling the ability to see opportunities where others do not, and to be a disciplined seller. 

Asset management creates value 

  • A deeper understanding of occupier requirements enables the firm to maximise each asset’s potential through innovative and sustainable management. 

Consistency counts over the long run 

  • A superior investment track record is built through consistent outperformance across cycles. 

The firm offers a range of strategies across the risk-return spectrum.

Sector forecasts

INDUSTRIAL: 

Rent growth for logistics – expect divergent trends ahead 

The pandemic accelerated and amplified rent growth across most US logistics markets. At the national level, rent growth surpassed 15% for two consecutive years in 2021 and 2022. For specific markets and submarkets, rents more than doubled from 2020-24. While such staggering growth was unsustainable, this trend did highlight the critical nature of logistics facilities in bolstering supply chain resilience. Geopolitical as well as weather and climate related risks persist which can derail just-in-time supply chain models. This structural need for space is bolstered by an urgency for automation, robotics and artificial intelligence systems to increase efficiency and solar-power generating capacity for the roll-out of EV delivery fleets. Given the low unemployment rate in recent years and the likely challenges ahead for recruiting and retaining warehouse workers, modern logistics stock capable of housing more advanced and highly automated systems is critical.

Although there is still good embedded value in many legacy logistics markets characterised by longer leases and strong rent increases during and since the pandemic, we believe that older stock will increasingly face functional obsolescence.

Absorption of space in recent years has been highly bifurcated between modern and legacy stock regardless of size segmentation (chart below). We expect divergence in both rent and capital value growth within logistics based on the modernity of the stock.

OFFICE: 

Our office sector rent growth forecasts are marginally less bad than previously. Office is still in the doldrums with little improvement in recent quarters on indicators such as back-to-office or other occupancy-boosting trends. We continue to believe that modern stock will outperform legacy and within modern, the highly responsive best-of-the-best handful of assets will shine. But the majority of older assets will not be attractive to tenants, compliant with sustainability regulations or as amenable to the types of occupiers and jobs that can be Al-augmented. Legacy office will, therefore, continue to see rent and capital values decline over our five-year forecast outlook period. Absorption data also clearly shows the modernity bias in the office sector (chart below). 

Both medical office and life sciences should perform better-especially as the professions occupying them have a much greater propensity to work from the office rather than from home. Rent growth in both sectors nationally will likely be slightly below inflation making asset, as well as market and submarket, selection critical. We expect Raleigh to be the standout life sciences market for rent growth in the five-year outlook.

RESIDENTIAL:

Rent growth for residential – a slow year or two ahead, rebound to follow 

Stabilised vacancy rates for the multifamily apartment market nationally have been hovering just under 6% in recent months (Real Page) which is approximately 100bps higher than the average vacancy rates for the same months over the past nine years. The largest amount of new residential stock since the 1980s was delivered across the country in the past year with still sizable net volumes to deliver over the next year. However, the US has suffered from an underinvestment in housing over the past decade and there remains a mismatch in design and price point between much of the stock available and what renters want. We therefore, downgraded our multifamily apartment rent growth for the outlook period-in particular for this year and next, after which we anticipate a rebound.

With rent growth averaging 3.3% p.a. for the five year period, apartments should trail SFR rent growth but likely outperform student accommodation. Rent growth from September 2023 to April 2024 for the student accommodation market was the second strongest season on record going back to 2012 with only the comparable period of 2022-23 stronger. Even as conventional apartment rents flattened over the past year, student accommodation rents surged higher despite the markets being interlinked in college towns and cities. We expect rental growth to decelerate, from 5.6% in the one-year trailing to 02 2024 versus 2.9% in the five-year forward annual average in our forecast.

RETAIL: 

We have maintained broadly the same rent growth forecasts in the retail sector nationally versus our forecasts six months ago: 3.6% for neighbourhood and community centre (NCC) retail, but basically zero growth for malls. Retail REITs reported their lowest vacancy rate this century at the end of 2023 at just under 3.5%. Outside of REIT-held retail, vacancy was slightly higher at 5.7% or 6.4% for NCC, according to Co-Star and NCREIF data, respectively. According to both these sources, vacancy was at/close to its lowest point since before the GFC. Malls, however, recorded a 9.1% vacancy rate (Co-Star 01 2024), close to the highest vacancy rate recorded in the subsector and more than double the vacancy rate that characterised the sector in the five years prior to the pandemic.

OTHER:

We prefer NCC in markets like Seattle, Tampa, Charlotte, Raleigh, Salt Lake City and Austin –markets which rank well in terms of projected population growth and retail sales and which currently have low vacancy (around 3% or less) and a fairly limited retail construction pipeline (less than 1m sqft for all cities mentioned except for Austin at around 1.6m sqft). The real opportunity for select assets is to take rents to market levels and boost income rather than relying on annual rent growth which may be unreliable for all but fortress locations. 

Strategic corporate development 

CBRE Investment Management seeks to be a leader in global real assets investment management by consistently delivering outstanding performance and exceptional client solutions. The firm continues to bolster its existing global platform and grow purposefully over time. In particular, the firm is focused on growing the following programs over the next three to five years in alignment with investor appetite and objectives: 

  • Open-end, diversified core real estate funds in the US and Europe 
  • Open-end, diversified global core-plus funds in real estate and infrastructure 
  • Open-end, sector-specific core-plus funds in logistics and residential in the US and Europe 
  • Closed-end, enhanced return real estate fund series in the US, Europe and APAC, plus a global opportunistic secondaries fund series 
  • Listed real assets strategies across real estate and infrastructure 
  • A select number of premier separate accounts across asset classes, regions and/or execution formats.  

CBRE Investment Management does not place absolute limits on growth in any of the above areas, with the exception of selective hard ceilings on closed-end funds based on overall capacity of the investment opportunity. In general, the firm would limit growth if the expected high level of performance or service could not be provided or when growth would jeopardise the performance of existing investments. We do not foresee any potential conflict of interest that could arise from managing this particular account. 

COMPLIANCE STATEMENT

Senior management of CBRE Investment Management is responsible for ensuring compliance with a code of ethics, regulatory requirements, and fiduciary obligations. 

CBRE Investment Management is an investment adviser registered with the Securities and Exchange Commission under the Investment Advisers Act of 1940. It also is authorized and regulated in certain European and Asian countries to undertake certain regulated activities in conjunction with its investment advisory and fund management services. 

The firm has designated compliance officers across the regions and has adopted, implemented, and provided for reviews of adequacy and effectiveness of its written policies and procedures. 

All employees are required to comply with the Investment Management Policies and Procedures, which include legal and compliance policies.