- Global real estate
investment volumes reach US$1.75 trillion in 2018 and are forecast to
match this trend in 2019
- Real estate
investment cycle is expected to extend, allowing time for investors to
adjust to a period of rising interest rates ahead
- Cross border
investment flourishing, with EMEA the top target
HONG KONG, CHINA - Media
OutReach - 18 March 2019 - Real estate transaction volumes in 2018 were the strongest on
record reaching US$1.75 trillion; a 4% year-on-year (y/y) growth and surpassing
previous highs of US$1.68 trillion in 2017, according to new data from global
real estate services firm Cushman & Wakefield.
The Global Investment Atlas 2019 reviews international investment
patterns from 2018 and anticipates market performance for the year ahead.
The firm forecasts record levels to be maintained in 2019, in the region
of US$1.75 trillion, as investors target a wider range of markets to find
opportunity, and more sellers come forward as real estate strategies adjust to
evolving monetary policy, geopolitical tensions and structural change. The
report states that pricing is expected to edge ahead, however this will be
driven by stable yields and steady rental growth for the best assets rather
than yield compression which has typified recent years.
Report author David
Hutchings, Cushman & Wakefield's Head of Investment Strategy EMEA Capital
Markets, explains: "The
economic environment is weaker than expected just a few months ago but so too
is the inflation outlook on a global basis. As a result, while risk is up, the
day of reckoning on interest rates for corporates and investors has again
been delayed. The coming year is therefore set to see a further extension of
the property cycle, offering investors another chance to get their portfolio
into shape ahead of a period of slower growth.
"With a stable, contracted income
and exposure to growth and inflation, real estate continues to be incredibly
attractive and demand remains strong for the right product. However, defining
the right product has become ever harder as powerful, market-moving occupier
strategies are reshaped by e-commerce, social and business change, low growth
and affordability constraints."
James Shepherd, Cushman & Wakefield's Managing Director of Greater China Research said: "Despite recent adjustments to the reserve ratio requirement, it seems unlikely that restrictions specifically targeting real estate debt are likely to be loosened in any significant way for the remainder of the year. Nevertheless, we forecast continued opening-up of the Mainland Chinese commercial property market to foreign investors and banks."
Shepherd added: "With
deleveraging policies likely to remain in place, real estate outflows will be
slow to recover but should steadily improve should lending and outbound
investment policy soften. In a time of tight liquidity back home in China,
Chinese investors are actively disposing of assets at a global level including
"Cushman & Wakefield forecasts that Shenzhen, Guangzhou and Hong Kong are
set to see increased investment demand through 2019. Beyond core cities of the
Greater Bay Area, we also note strengthening interest in cities such as Zhuhai,
Zhongshan, Foshan and Dongguan as well as key provincial capital cities."
Catherine Chen, Greater China Head of Capital Markets Research and
Forecasting, added: "Despite trade
tensions between the US and China, US buying in the country reached record
levels last year, particularly in Shanghai. As China transitions to a
services-led economy, the nation will continue to draw in global interest to
the growing CRE investment market."
A Complex International Picture
North America rebounded from 2017's volume decline to outperform in
2018, both as a target and a source of real estate investment with
late-cycle tax stimulus in the US helping
to offset higher borrowing costs. Although all global regions were active
buyers last year, North America was the only capital source to increase overall
commercial real estate (CRE) allocations compared to 2017, with volumes
increasing 17% y/y to US$546 billion. Investment volumes in North America are
predicted to reach US$530.7 billion in 2019. This is a 3% decrease y/y but a
reflection of the regions' mature position in the property cycle putting upward
pressure on yields and follows an exceptional 2018.
CRE allocations in Europe, Middle East and Africa (EMEA) and
Asia-Pacific (APAC) fell 2% and 1% respectively in 2018, the latter largely due
to fewer global purchases over the year. European and Asian institutions are,
however, increasing allocations to real estate, and both regions are also likely
to see more inbound cross border demand, notably Europe in the short-term, and
Asia in the medium-term as investors follow demographic trends.
EMEA investment volumes recorded US$331 billion in 2018, a 10.8% y/y
fall owing to a pull-back from both global and domestic sources and the
conclusion of some large portfolio deals. European retail documented its third
consecutive year of decline (US$56 billion), with lower volumes across much of
the region. Industrial and office transactions also contracted by -24.7% and
-9.7% y/y respectively but was likely down to a shortage of investible stock.
EMEA investment volumes in 2019, are predicted to reach US$339.2 billion, a
2.5% increase on 2018 levels, driven by increased demand across a growing range
of tier 2 cities and new sectors.
Robust levels of domestic and continental spending, led Asia-Pacific
investors to maintain the highest overall share of investment volumes in 2018
at US$866 billion, a new record for the region. While domestic investors
retained the majority of transaction volumes, all sources of capital targeting
the area increased investment. Development sites were the most targeted sector
in the region, representing 80% of the market, previous records were also
surpassed in the office and industrial sectors, while the hotel market reached
its strongest point post-GFC. Asia-Pacific investment volumes are forecast to
reach US$875 billion in 2019, a 1% increase on 2018.
Following political upheaval in Brazil, Mexico, Costa Rica and Colombia,
and a pullback in investment linked to exchange rate depreciation against the
dollar, Latin America recorded the lowest transaction volumes in almost ten
years in 2018. Nonetheless, investment volumes are expected to leap 6% to
US$2.4 billion in 2019 as opportunistic investors grow in confidence. APAC
investors are increasing their exposure to the region for example, largely
looking for hotels and development land. Chinese investment into logistics
facilities is also expected to continue.
Continental Flows Boosting
Cross Border Investment
In contrast to wider
nationalist trends, cross border real estate investment has flourished, growing
10.7% to US$405 billion. This was led by stronger continental flows.
Carlo Barel di Sant'Albano, Chief Executive of Cushman & Wakefield's
Global Capital Markets & Investor Services, said: "International
capital flows are becoming yet more dynamic, increasingly cross border and more
about balancing quality with quantity -- this will be true whether you are
referring to stock, yields, talent or living standards.
An abundance of capital
will continue to drive the market and sustain pricing in 2019, but structural
forces, such as e-commerce, will be driving areas of outperformance even as the
cycle slows. Hence there is a real need to look beyond market averages to see
the detail of the local market, the deal, the vendor, the lender and above all,
While the USA was the
top target for global CRE investment (US$45 billion), EMEA has retained its
historical position as the most sought-after destination for international
capital, with the most cities among the top ten cross border investment targets
and attracting 53% (US$88 billion) of global investment.
The USA and Canada were
the top sources of cross border investment capital, together accounting for 40%
of all non-domestic investment flows last year (US$125 billion). German capital
rounded out the top three at US$26 billion. Interestingly, despite UK
investment managers strengthening their continental portfolios, French
cross-border investment outflows outpaced the UK for the first time on record.
The make-up of cross border investment from Asia Pacific likewise altered, with
mainland China and Hong Kong dropping back but Singapore and South Korea moving
up the rankings.
Please click here to download the report.
About Cushman & Wakefield
Cushman & Wakefield (NYSE: CWK) is
a leading global real estate services firm that delivers exceptional value for
real estate occupiers and owners. Cushman & Wakefield is among the largest
real estate services firms with 51,000 employees in approximately 400 offices
and 70 countries. Across Greater China, there are 20 offices servicing the
local market. The company won four of the top awards in the Euromoney Survey
2017 & 2018 in the categories of Overall, Agency Letting/Sales, Valuation
and Research in China. In 2018, the firm had revenue of $8.2 billion across
core services of property, facilities and project management, leasing, capital
markets, advisory and other services. To learn more, visit www.cushmanwakefield.com.hk or follow us on LinkedIn (https://www.linkedin.com/company/cushman-&-wakefield-greater-china)