Summary

00:03:27 - Hines Global Income Trust - Information about the Hines Global Income Trust available on the NetWealth iCapital investment menu, focusing on high-quality, income-producing commercial real estate properties.

00:04:00 - Current Real Estate Themes - Discussion on current themes in the global property sector, including AI growth, housing shortages, industrial property landscape, and challenges in office and retail properties.

00:05:05 - Impact of Falling Inflation and Normalizing Rates - Exploration of how falling inflation and normalizing cash rates and bond yields positively impact the property sector.

00:05:56 - 2026 Global Investment Outlook - Summary of Hines' 2026 Global Investment Outlook report, highlighting the recovery in real estate markets and the expected strong performance in 2025 and 2026.

00:07:53 - Role of Real Estate in Portfolios - Discussion on the role of private and listed real estate in an investor's portfolio, emphasizing its bond-like and equity-like characteristics and its low correlation with equity and bond markets.

00:09:14 - Impact of Geopolitical Events on Real Estate - Analysis of how ongoing geopolitical developments and de-globalization trends affect real estate investments.

00:10:15 - Sector-Specific Impacts of De-Globalization - Focus on how de-globalization impacts specific sectors like industrial and manufacturing, with a trend towards on-shoring and supply chain resilience.

00:11:23 - Benefits of a Global Real Estate Portfolio - Discussion on the advantages of maintaining a global real estate portfolio, including access to diverse markets and opportunities.

00:13:04 - Residential Property Investment Trends - Comparison of residential property investment trends in Australia and other developed nations, highlighting the benefits of institutional investment in residential properties.

00:16:02 - Industrial and Logistics Sector Insights - Insights, including demand growth, rent growth, and differences between large warehouses and infill industrial properties.

00:21:11 - AI and Data Center Investments - Discussion on the potential and investment opportunities in the AI and data center sectors, driven by exponential demand growth and natural supply constraints.

00:23:13 - Emerging Real Estate Sectors - Exploration of emerging real estate sectors like self-storage and student housing, and their investment potential.

00:26:03 - Managing Liquidity in Real Estate Strategies - Explanation of how Hines manages liquidity in their evergreen real estate strategy for private wealth investors.

00:27:12 - Currency Management in Global Real Estate - Discussion on how Hines manages currency exposure in their global real estate strategy, including the use of natural hedges and local debt.

Paul O'Connor:
Welcome all to another installment of the Network Portfolio Construction Podcast series. I hope all listeners have had a positive start to 2026, unlike markets that have welcomed the new year with about a higher volatility, mainly centered on equity markets and the tech sector particularly, but also recent geopolitics issues have arisen again with hostilities rising across the Middle East. On today's podcast, we have Josh Scoville from Hines. Hines is a leading global real estate investment manager that own and operate US 92 billion of assets across property types and on behalf of a diverse group of institutional and private wealth clients.

Hines has 68 year history and employee 4,600 employees in 30 countries that invest in, develop, and manage some of the world's best real estate. Hines has 156 developments currently underway around the world and historically has developed, redeveloped, or acquired 1,857 properties, totaling over 636 million square feet. The firm's current property and asset management portfolio includes 832 properties representing over 288 million square feet. With extensive experience in investments across the risk spectrum and all property types and a foundational commitment to sustainability, Hines is one of the largest and most respected real estate organizations in the world.

Josh Scoville is a senior managing director, global head of research, and is a member of the firm's investment committee. He heads the firm's global proprietary research group, which identifies how market forces, including macroeconomics, commercial real estate fundamentals, and capital markets influence investments and returns. Prior to joining the firm, Josh served as director of US research for the market leader in analyzing and forecasting commercial real estate markets in North America and Europe. He was responsible for managing their research platform and participating in broader initiatives, including quarterly forecasting, market analysis, thought leadership, and product development.

Josh is a member of the Urban Land Institute and Pension Real Estate Association. He earned a bachelor of arts in economics and business management from Boston College and is a chartered financial analyst charter holder. The Hines Global Income Trust iCapital Offshore Access Fund is available on the net worth high capital investment menu. The trust is available to Australian wholesale investors and invest in a diversified portfolio of high quality income producing commercial real estate properties across the globe that aims to provide investors with stable income and potential capital appreciation. The global property sector continues to evolve and adapt.

Current themes such as the phenomenal growth of AI, which obviously needs land for power generation and data centers, a global housing shortage, and rising demand for rentals, and evolving industrial property landscape, responding to the move to deglobalization, and of course, the recent office and retail property challenges all provide opportunities for active management. So, we'll be interested in understanding Josh's views on the opportunities and risks across the residential, industrial retail and office property sectors, including whether investors should focus on residential and industrial, property at present, at the expense of office and retail property.

As Hines are a global manager of property, it'll also be good to understand what are the countries and regions of interest to Hines. In addition, falling inflation, normalizing cash rates and bond yields are positive news for property due to the leverage employed by the sector. And again, I'll be keen to dig deeper into this with Josh today. So, maybe for starters, Josh, can you tell us about Hines and your role at Hines?

Josh Scoville:
Sure, Paul, and thank you for having me and for that thorough introduction. As you mentioned, I am the global head of research at Hines. I sit on the investment committee and I really help guide strategy and understand which markets we should be investing in on the best risk adjusted basis and where risks are elevated and we should be more cautious. So, what I look at in that aspect is really real estate fundamentals and the real estate fundamental cycle. So, that's supply demand, occupancy rates and rent growth, as well as capital markets, the availability of debt and equity, transaction volume, et cetera.

Paul O'Connor:
Hines has recently released its 2026 global investment outlook report titled Cleared for Takeoff. Can you summarize the key findings that led you to conclude that real estate's now prime to begin in the seat?
Josh Scoville:

Well, real estate went through a fairly significant and elongated downturn due to the rising cost of capital that really started around mid 2022, but it's increasingly clear that 2025 was the bottom. And we see recovery in transaction volumes. We're seeing increases in prices, what's particularly true in Asia and Europe and increasingly the case here in the United States. So, we think that 2025 was going to be a great vintage to be investing and we've had actually our strongest year of acquisition activity ever in 2025 and 2026 is going to be an excellent vintage as well. So, signs that the recovery are underway and returns going forward are really going to be driven by income growth.
It's leasing, repositioning assets, operational excellence, which does differentiate Hines from some other investment managers. As you noted, we have 4,600 employees and we're vertically integrated with many of those employees in engineering, property management, and asset management at the local level. So, that's going to be the driver of returns going forward, not falling cap rates, which had been a strong driver of returns over the last 35 years or so. We do see rising construction costs, and those construction cost increases are slowing, but they're still increasing.
And the price resets that occurred due to that rising cost of capital, as I mentioned, really make existing assets a prime opportunity for future value appreciation, and as I mentioned, consistent income. Relative to other asset classes, real estate has just gotten too inexpensive to ignore, and so there's kind of a renewed focus on it from both retail and institutional investors.

Paul O'Connor:
So, Australian investors are typically allocated to Australian unlisted property, full reliable income and lower volatility with some hope to generate some longer term growth. What role does Hines believe private real estate or uplisted real estate can play in an investor's portfolio, especially in this increasingly volatile global landscape? How should investors think about real estate in relation to the other asset classes, as well as other private markets in relation to public markets?

Josh Scoville:
Well, real estate offers a combination of bond-like and equity-like characteristics. We've got income that is supported by rental revenue, which is very bond-like, an appreciation that's driven by cashflow growth, which is more equity-like. We think this cycle is going to largely be driven by the ability to drive cash flows at the property level. So, increasing those cash flow flows is going to be the driver of returns. And as I mentioned earlier, it's very important to be kind of really close to that real estate to be able to do that.

It does have low correlation with equity and bond markets, as many private markets do, and real estate has historically delivered stable returns during times of volatility, so it's a great diversifier for equity and bond portfolios.

Paul O'Connor:
Geopolitical events are increasingly taking center stage with significant implications across the different asset classes. How might real estate be affected by ongoing geopolitical developments and the broader trend of deglobalization?

Josh Scoville:
Deglobalization is not a 2026 new event. It's been going on now for several years. And winning in the commercial real estate investment sector will demand a hyper local approach to real estate investing. Due to deglobalization, we do see new quarters of demand that are forming. We see that being driven by a rise in intra-regional trade, so more trade within Asia and across Asia, more trade with the Americas and other American countries, and more trade within Europe itself than other European countries.

So, investors need to understand not just conditions at the region or country level, but the hyper-local dynamics of neighborhoods, districts, and micro markets. This is where Hines with its strong local presence can excel.

Paul O'Connor:
Are there any particular sectors or industries that are challenging in a more faster way due to deglobalization? And I'm thinking such as manufacturing and US onshoring manufacturing, which has been, I guess, a longer term trend now for probably at least seven or eight years.

Josh Scoville:
Yeah. I think industrial is certainly one of the easiest to point to when in terms of restructuring global supply chains and bringing that onshoring or nearshoring or friendshoring to different countries and ports where it otherwise had a smaller presence. So, that's certainly a trend that we see playing out. The other is supply chain resilience. So, not just having a single supply chain and COVID really highlighted where that creates vulnerabilities, but having multiple supply chains and that resilience supply chain so that you can get your goods to where they need to be in more than one way. And so, that creates good demand growth for industrial. And certainly, we've seen industrial demand be one of the real winners coming out of a post COVID world.

Paul O'Connor:
If real estate's increasingly driven by this hyper local dynamic, should investors still consider a global portfolio? And I guess, for example, many Australians invest in residential investment properties, and what are some of the considerations regarding real estate exposure of this nature, as opposed to holding a diversified global portfolio of institutional real estate?

Josh Scoville:
Well, one of the most enjoyable parts of what I do is look across the global landscape and identify markets that are recovering at different speeds and seeing trends play out in one region that then spill over to another region. So, we'll use industrial again as a really good example of that. Post COVID, the industrial sector in the United States had a boom, and we quickly saw that boom spill over to the UK, and then in the UK spilled over to continental Europe. And Asia was actually the last to enjoy that boom, but we really pushed into Asian industrial real estate because we knew that boom was coming.
And we identified from a research standpoint that once e-commerce sales surpass, about 8% to 9% of total retail sales, industrial demand tends to explode. And so, we identified those countries where that was occurring, and sure enough, industrial demand boomed and rent growth followed thereafter. Having a global portfolio allows you to access more markets than you would otherwise have access to if you maintain a domestic portfolio. It opens up a lot more opportunities, a lot more different ways to invest, a lot more different sectors to invest. And again, that global pattern recognition is one of my favorite things about what I do.

Paul O'Connor:
Certainly makes sense to me, Josh, to have a global view when you're considering adding unlisted property into a diversified portfolio. And as I made the comment earlier that Australians, probably not unlike many other developed nations, have this obsession with investing in residential property. But when I look at the opportunities, for example, across Asia and the booming and growing middle class and that need for property and ongoing property development, I think to myself, you're going to get a lot better diversification benefit having that global view there. So, yeah, I certainly can appreciate the comments and your thoughts on that topic.

Josh Scoville:
Residential, Paul, would be another kind of sector where prior to call it the mid 1990s in the United States was very much like the Australian residential sector. Ownership was fragmented, a lot of mom and pop landlords, and it was just a non-institutional sector. Fast-forward to today, it's a well-established and major part of the commercial real estate investment environment in the United States. It's established in Japan. We see an nascent sector occurring in South Korea, in Australia, and Canada, and even parts of Europe.
So, again, looking at kind of the trajectory of the US multifamily for rent market over the last 40 years, I can see that playing out in a lot of different countries over the next, call it, 10 to 20 years.

Paul O'Connor:
Yeah, certainly very relevant given the housing shortage of the rental growth in Australia with a significant migration we've had over the last decade or so that we do need more institutional investment here as well in residential property, but time will tell how that plays out. Let's dive into the outlook for the major real estate sectors that the living sector is one of Hines' high conviction theme. So, what are the factors underpinning your confidence in this sector?

Josh Scoville:
It's the housing shortage that you just mentioned that's very apparent in Australia, easily seen with the rise of rents, but that's not just an Australian phenomenon. That's really a global developed country phenomenon. And so, that's primarily why we find it a very attractive sector. The other kind of two things I would mention with residential real estate investment is that the demand tends to be fairly inelastic relative to commercial demands. It's not insensitive to changing economic conditions, but the variability of that demand, those demand changes is less so than you'll see in the commercial sector.
And then this is a little esoteric, but the CapEx required to maintain multifamily for rent properties is significantly less than it is for, for instance, the office sector. And so, that's an attractive quality as well.

Paul O'Connor:
Another major commercial real estate sector is obviously industrial and logistics. You've touched on industrial, but what should investors be aware of with these sectors?

Josh Scoville:
The industrial sector, as I mentioned, has seen incredible demand growth, probably the number one sector that benefited from COVID in terms of the demand side. There was a supply response, particularly here in the United States, less so in Europe, but you saw a similar supply response in, for instance, Japan. And so, you did have some short-term overbuilding in some markets and that has slowed rent growth, but there has been so much rent growth over the last five years, which is a kind of a typical lease term, that as those leases roll over in '26 and '27, the embedded NOI growth is material.
And so, as you turn those tenants over to today's market rents, the uplift on NOI can be anywhere from 15% to 30% depending on the market. The other thing that's interesting about the industrial sector is the differences between large big box industrial warehouses that might be on the outskirts of a metropolitan area and infill industrial boxes that are really catering to last mile distribution and haven't been nearly as overbuilt. And that's relatively true across the globe. And so, you're still seeing really strong fundamentals in those types of investments.

Paul O'Connor:
What about the outlook for other property sectors such as office and retail? And obviously office went through a fairly turbulent time during COVID, and then also I guess the retail property sector has faced some headwinds with the ongoing rise of online consumers. So, what's your thoughts on these sectors at the moment, Josh?

Josh Scoville:
Sure. We'll start with the office sector. And I think the most interesting thing about the office sector is how different it behaved in a post COVID world by region. So, the Koreans never worked from home and the Japanese, the Tokyo office sector is probably one of the strongest in the world, if not the strongest, with low vacancy rates and still very, very strong rent growth.
Australia behaved more like the United States where work from home had a material impact on office demand, but what we do see in the United States, and it really started in Manhattan, but it's spilling over into college San Francisco today, which is probably 12 to 18 months behind Manhattan, is this really strong pent-up demand that is being unleashed. And so, leasing an absorption in Manhattan today is as strong as it was pre-COVID, and that's driving vacancy rates down very quickly. It's starting to have an impact on rents. And for really high quality office space, there's just not enough of it for the tenants that are looking to move into that space.

And so, there's a bit of a bidding war amongst tenants for the highest quality space. But as that space leases up, that recovery really is starting to spill down into the next quality of space. And even class B space in Manhattan is leasing today and seeing positive demand growth. We see kind of early signs of that due to the AI boom in San Francisco. There is no new office construction on a net basis in the United States, and that's been true now for three plus years. So, we're actually demolishing or converting more office space than we're adding. So, we have net negative supply. Europe is really kind of a tale of two submarkets.

The CBDs, Paris, London, City, the West End are quite tight and seeing very similar dynamics in terms of just not having enough high quality office space to meet the demand of existing and growing tenants. And then suburban submarkets which are much weaker. Asia, Tokyo and Seoul at the top, Australia behaving more like the United States. So, that's office. Retail has gone through what the office market is going through today, but 15 years ago. So, 15 years ago, retail started to be impacted by e-commerce and supply shut down. And so, we just haven't built much retail over the last 15 years. And over the course of that time, we have separated winning retail centers from losing retail centers.
And the tenants obviously want to be in the winning retail centers. And so, there's lines and queues to get into those centers and some competition, which is driving rent growth. Again, you can see that very clearly here in the United States, and the losing centers have either been raised or converted, or they're just obsolete. So, they're non-competitive within the market. And it's a really good analog for kind of what I think is going to happen to the office sector over the next five to 10 years. Five years from now, given the lack of new supply, as well as the ESG requirements of many corporate tenants that want to be in sustainable, high quality office space, there's going to be a bidding line for those and the losing office buildings will be either converted or raised.

Paul O'Connor:
Yeah. Well, I guess tight things never change where you get a level of underinvestment in certain areas and sectors of the economy, such as oppose and retail. And then you have the standout, I guess, premium assets in that space where demand just continues, as you've pointed out there, Josh, and strong demand. So, interesting, interesting, the thoughts and the outlook there you have on both those sectors. The AOM data center build out's obviously dominated news headlines and also contributed significantly to a market volatility, but what's Hines's view on this asset class and its future and an investment portfolio.

And are you guys looking at investing and funding and developing some of the different properties required across AI and data centers?

Josh Scoville:
Yeah, I'm a fairly big believer in data centers, really for two reasons. You've got this exponential demand growth being driven by breakthroughs in AI, and you have this natural supply constraint in the form of power. And so, those two things are a good combination to generate long-term rent growth. We are active in the data center business, particularly in Europe where we have relationships with local utilities, and because we've been developers for a long time, and we're acquiring land and getting access to power, and then selling that land off to data center developers. That's been a very interesting business.
And the other way that we've been accessing the data center business is through industrial investments that may have more power than they need and can be converted to data centers. And so, we've had a couple of instances where our industrial buildings have been bought as industrial investments, but then sold off to data center developers because of their access to power.

Paul O'Connor:
And the other sectors that investors might not be paying enough attention to at present?

Josh Scoville:
Well, we mentioned housing earlier. One of the kind of offshoots of housing, as I think of as the self-storage sector. So, the self-storage sector, it's basically like renting a garage or a basement. It does have kind of ties to housing markets. It's an established sector that's increasingly institutional here in the United States, but like the residential sector, it's very nascent in other parts of the world. So, we've been actively investing in the self-storage sector in the UK. Another kind of different form of housing is student housing.

And so, where we see growth in high quality universities, particularly in Europe, there's often a shortage of purpose-built student accommodations with a lot of students just renting typical flats. And so, we've been active in that business for close to a decade, if not more now, and have acquired a good portfolio that does meet the demands of students.

Paul O'Connor:
Hines has an extensive operating platform across the world. So, can you tell us, Josh, more about this platform and your actual boots on the ground in the various locations? I noted you've got, I think, 30 different locations around the world. So, how does this sort of operator-led approach differ from being an allocator or a passive investor, I guess?

Josh Scoville:
Yeah. I mean, we believe operators like Hines are just better equipped to manage through periods of uncertainty than allocators. Our boots on the ground live in the markets that they invest in, so they're very familiar and intimate with the quality of submarkets within the markets that they live and work in. And that gives us a better inside information on kind of changing dynamics of a metropolitan area. As you mentioned, we're in 30 countries and I think close to 300 cities.

Paul O'Connor:
Yeah. Well, it's certainly made, I guess, born on my mind that to actually invest in real estate, develop, improve real estate, you must have people on the ground. It can't be done out of one location such as Melbourne, Australia buying into Europe because of all the different nuances in the market. So, having that actual corporate structure there, I think certainly I would agree. I think it sets Hines up to be a quality manager and developer of this property.

Josh Scoville:
Yeah, we would agree with that. And being the global head of research and having local analysts that I can talk to that have really inside knowledge of what's going on in the markets is super helpful for what I do.

Paul O'Connor:
And super interesting, I would've thought being able to get those insights into the various countries and regions in countries and look at them, I guess, from a perspective of a global lens then. So, it'd be a fun role that you have there, Josh.

Josh Scoville:
It absolutely is.

Paul O'Connor:
Some unlisted property funds in Australia managed liquidity through sort of holding a cash leave. And some actually will have a small exposure to listed REITs or even a line of credit or a combination thereof. So, how does Hines manage liquidity in your evergreen real estate strategy for private wealth investors?

Josh Scoville:

We think having a portfolio that provides stability in downside protection is a major factor in avoiding liquidity or redemption issues in the event of a market downturn, and that was certainly the case over the last several years. It's about building a portfolio of high quality, well-managed assets, strong operating fundamentals diversified across global markets and sectors. Diversification also means having a large number of assets without being too heavily concentrated in any one asset, market, or sector. And then finally, a portfolio that provides stability and downside protection is a major factor. It's something that needs to be put in place prior to downturns.

a lot of what I do from a macro view is help us understand where in the cycle each market that we are active in is, and structuring our portfolio appropriately based on that analysis.

Paul O'Connor:
Maybe finally, Josh, from a currency perspective, some global property funds will hedge the capital, but not the income. So, how does Hines actually manage currency exposure in your evergreen global real estate strategy?

Josh Scoville:
Yeah. We really manage the FX risk structurally through diversification across regions and currencies. One of the interesting things about a global portfolio is that on an unhedged basis, regional diversification actually increases the diversification benefit, i.e., If you were to hedge everything into dollars, for instance, the diversification benefits actually fall pretty dramatically, which is really interesting and something I've been chewing on for a long time and not 100% sure why that has been the case, but that has been the case. We do put natural hedges in place on our international portfolios or non-US portfolios through the use of local debt, and so that adds a bit of a hedge as well.

Paul O'Connor:
Josh, thank you very much for joining us on the Network Portfolio Construction Podcast today. It's been a really interesting chat and discussion with you, and it's certainly provided me with some further food for thought about that retail and office property is not there. There is plenty of opportunity there, and it certainly made sense, your comments there. Obviously then the opportunities in the AI and data center rollout that is going to be, I think, a long-term scene there. And I guess also, again, back to the comments we've made earlier around the role that global property can play in a diversified portfolio there.
And I think that at time, it's a little overlooked by Australian investors who have, particularly at the moment, the obsession with private equity and private credit in portfolios. And I think to myself, what about the reliable income streams that you can actually generate out of the good diversified property portfolio, the lower correlation that it has to listed equities. And really, I think overall, it just provides a good diversification opportunity in a portfolio there. But thank you very much for joining us, Josh, for your insights and the time.

Josh Scoville:
Thank you, Paul. It's been a pleasure.

Paul O'Connor:
And to the listeners, thank you again for joining us on the Network Portfolio Construction Podcast series. I hope you've enjoyed the discussion with Josh from Hines as much as I have, and I'll look forward to you joining us on the next installment of the podcast series. Have a great day, everyone. Thank you.