Clarion Partners (Real Estate)

2017 Real Estate Top 100 ranking: 29https://www.clarionpartners.com/

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Manager Details

Corporate overview

Clarion Partners has been a leading US real estate investment manager for more than 35 years. Our mission is to use the judgment of our experienced professionals as well as our proprietary research to design real estate investment solutions for our clients with the potential to deliver superior returns and create value.

With $42.8bn in total assets under management for more than 250 institutional investors around the world, Clarion offers a broad range of equity and debt strategies across the risk/return spectrum – from core/core-plus to value-add/opportunistic. The firm, which is head-quartered in New York, has more than 280 employees and a presence in major markets across the United States as well as in London, UK, and São Paulo, Brazil.

Clarion Partners is distinguished by a performance-driven approach, organisational stability and a mandate of accountability to our clients.

We are scaled in each sector and benefit from our well established network of experienced professionals who bring a deep knowledge of local markets to every investment decision.

Investment principles & strategy

Experience has taught us that attractive investment opportunities can be identified at every phase of the real estate cycle. Clarion Partners invests in high-quality properties, typically from the five key property types, in major markets throughout the US and in Brazil. We carefully screen each acquisition using in-depth research and rigorous due diligence, focusing on properties that compete effectively over time and are located in markets with strong fundamentals and consistent liquidity.

Strategic corporate development

Clarion Partners offers both commingled fund and separate account formats to its investors. Clients can select from a broad range of debt and equity investment options to build their real estate portfolios, including diversified core strategies, sector-specific core-plus strategies and value-add/opportunistic strategies. Going forward, we will continue to build our business by offering our clients real estate solutions that have been tailored to support their objectives and that capitalise on current market opportunities.

Sector forecasts

INDUSTRIAL: The US industrial sector reported ongoing strength amidst robust warehouse demand. In Q2, the national industrial availability rate dropped by 10bps to 7.8%, following the first quarter of flat growth in availability Q1 since Q2 2010 per CBRE-EA. Given the historically low levels of vacancy in the majority of US markets, rents continue to grow at a fast pace. Ever expanding domestic and international consumer activity amidst the rising market share of e-commerce boom continued to drive new warehouse demand. Industrial rents have risen to all-time highs, fuelled by tenant demand and a lack of available supply. Overall, the surge in global online sales is viewed as a positive for the sector.

In Q2, industrial transaction volume totalled $15.3bn, up 10.4% year-over-year per Real Capital Analytics. Portfolio deals rose by 38.3%, while single-asset sales were up by 2.5%. Activity remained strong in secondary and tertiary markets, although major market transactions were down, likely due to deal and land scarcity. In Q2, the NPI industrial sub-index posted a total return of 3.1% (boostedlargelybythewarehousesegment)andanannualreturnof12.4%.

OFFICE: US office markets are healthy with stronger than expected office-using employment growth. In Q2, the national vacancy rate remained unchanged at 13.0%. The national vacancy rate for CBD markets remained steady at 10.7%, while the suburban vacancy rate rose by 10bps to 14.3% per CBRE-EA.

The US office market recorded its 29th consecutive quarter of positive net absorption, and most markets are near prior peak occupancy levels. High job availability and business confidence currently prevail, although landlords face a more competitive leasing environment following a wave of new construction. Absorption trends have been strongest in the Class A segments. The continued expansion of tech, creative industries, co-working, and financial services remained the dominant drivers.

In 2017, new construction is expected to reach a cyclical high. In top-performing markets, both new construction and redevelopment have risen, with pricing near peak levels in urban and suburban markets.

In Q2, office transaction volume totalled $33.6bn, a 1.6% decline year-over-year according to RCA. Trades of single assets declined, while portfolio deals were up 33.2%. Sales in the suburbs rose by 21.6%, while those in the CBD were down 24.1%. In Q2, the office sub-index of the NPI posted a total return of 1.6% and an annual return of 5.6%.

RESIDENTIAL: The US multifamily sector expansion remained remarkably resilient amidst the ongoing wave of new supply. In Q2, the national vacancy rate declined by 30bps to 4.6%, which is up 20bps year-over-year according to CBRE-EA. This marks a fifth consecutive quarter of year-over-year increases, which has led to a moderation in rent growth. National annual effective rent growth was approximately 2%, though select markets in the South and West ranged between 3% and 8%. In 2017, new multifamily completions are expected to reach a cyclical peak. With much of the new construction focused on Class A product in top urban nodes, rent and occupancy growth in theseareas is expected to be soft over the near-term. On Q2, multifamily transaction volume declined to $35.2bn, down 0.9% year-over-year according to RCA. The largest pullback was in mid/highrise assets and in major markets. Portfolio deal volume rose by 33.6%, while single-asset sales were down by 9.7%. In Q2, the multifamily sub-index of the NPI posted a total return of 1.5% and an annual return of 6.3%.

RETAIL: The recovery of US retail property fundamentals has remained generally steady amidst the rapid growth in e-commerce. Class A centres continue to attract tenancy that boosts foot traffic. In Q2, the availability rate for neighbourhood and community shopping centres remained at 10.1%, on par with the 2008 level according to CBRE-EA. Top malls and commercial districts significantly outperformed most other formats in occupancy. Many landlords, especially those of B/C malls in secondary and tertiary markets, will still face operational challenges even while the sector as a whole sees little ground-up development.

In Q2, retail transaction volume totalled $13.7bn, down 28.4% year-over-year, the largest decline of all sectors. Both portfolio level and single-asset deals fell by 52.3% and 20.8%, respectively. Regional mall, grocery, single-tenant, and urban/storefront sales were all down year-over-year. In Q2, the retail sub- index of the NPI posted a total return of 1.5% and an annual return of 6.9%, mainly due to the large appreciation in neighbourhood centres.

HOTELS: In Q2, the US hotel sector reported record absolute levels in the three key performance indicators in year-over-year results. Occupancy, ADR, and RevPAR levels were the highest for any Q2. Overall, the current expansion is more gradual due to a recent wave of new deliveries. Industry occupancy rose by 0.5% to 69.5%, average daily rate (ADR) rose by 2.2% to $127.43, and RevPAR climbed by 2.7% to $88.6 year-over-year (below the 30-year US average of 3.5%). Overall, hotels have held pricing power, as the lodging industry is aggressively and creatively competing with alternative accommodations like Airbnb.

The majority of investors have a positive long-term outlook for the sector. Lenders have been competing to finance quality hotel assets, influenced by expectations of healthy GDP growth and a significant amount of debt availability. In Q2, transaction volume fell by 0.8% to $7.3bn year-over-year according to RCA. Portfolio transactions increased by 48.6%. Secondary and tertiary markets also remained positive. Sales of limited-service were up 17.1%, while full-service was down 9.8%. In Q2, the hotel sub-index of the NPI posted a total return of 1.8% and an annual return of 3.7%.

COMPLIANCE STATEMENT

Statements regarding forecasts and projections rely on a number of economic and financial variables and are inherently speculative. Forecasts relating to market conditions, returns and other performance indicators are not guaranteed and are subject to change without notice. There can be no assurance that market conditions will perform according to any forecast. Past performance is not a guarantee of future performance. Information contained in this report, including information supporting forecasts and projections, has been obtained or derived from independent third party sources believed to be reliable but Clarion cannot guarantee the accuracy or completeness of such information. This is not an offer to sell, or solicitation of an offer to buy, securities.

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White Papers / Research from Clarion Partners (Real Estate)

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  • Office US: Suburban survival

    America’s swathes of sprawling suburban offices face a future of vacancy and obsolescence. But some innovative investors are breathing life into the unloved market

  • Student Housing: Top of the class

    US student housing is getting top marks from investors. Christopher O’Dea looks at a sector about to graduate

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    The multifamily sector continues to look attractive and capital is turning its attention to single-family home

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Head Office
230 Park Avenue
12th Floor
New York
NY 10169
United States
Contact
Natalie Evertson
Company website:
https://www.clarionpartners.com/
Year Founded:
1982

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