Cushman & Wakefield reports that this year’s global real estate transaction volume may surpass the $1 trillion mark. Analysts base the projection on last year’s $929 billion performance and other evidence that confidence is returning to the global market. China and the U.S. are expected to be key players, but significant growth is also expected in other countries such as India, Switzerland, Thailand and Australia. Experts are predicting that North America will be the hotspot this year, although Europe will likely attract plenty of attention thanks to its numerous business hubs and centralized location. For more on this continue reading the following article from Property Wire.
The global property investment market saw a modest 6% rise in activity during 2012 with volumes reaching US$929 billion which experts believe could be the start of a return of confidence that could take volumes above US$1 trillion in 2013.
Last year was a difficult one in most markets but investment volumes rallied in the fourth quarter of 2012, signalling the beginning of real momentum, according to the latest International Investment Atlas from global property firm Cushman & Wakefield.
Volumes this year could increase by 14% to exceed the US$1 trillion mark for the first time since 2007 and that increase is likely to be led by North America and Asian markets and driven by increased allocations to property by institutions and high net worth individuals and families plus increased stock coming to the market.
‘Last year was a year of profound uncertainty in the global economy which impeded decision making and market activity. We anticipate there will be less uncertainly this year and in fact, a true change in market confidence and indeed momentum seems to have been confirmed in the early months of 2013 as major global risk factors are seen to be receding, albeit not yet disappearing,’ said Glenn Rufrano, global president and chief executive officer of Cushman & Wakefield.
The report says that in 2012, China and the US were two key engines of the strong finish, the former benefitting from a record high in land right sales and the latter seeing a rush of activity to beat year end capital gains tax hikes. However growth was far from limited to these two global heavyweights and a range of other markets in all regions saw a final quarter rally notably Spain, Poland, Norway, Switzerland, Indonesia, Thailand, India and Australia.
It adds that the market to date has remained selective and focussed on core product. By region, North America and Developing Asia drove the overall global rise, with mature European and Asian markets largely flat and emerging markets in Europe, the Middle East, Africa and South America all down.
In 2012 by country, the US and Mexico were the biggest gainers in the Americas, Malaysia, Vietnam, Australia and New Zealand enjoyed the strongest growth rates in Asia, while for Europe, Finland, Norway, Switzerland and Ireland saw the highest growth. More modest increases in big markets like China, Germany and Hong Kong were also clearly instrumental in delivering growth at the global level.
In terms of market performance the Americas saw stronger investment activity, a bigger contraction in yields and more positive rental growth. Asia was more stable with EMEA clearly taking the biggest hit from the market slowdown.
The Americas share of global trading rose to 32% in 2012 from 28% in 2011 while EMEA slipped to 21% from 24%. Asia remained the largest global trading block, accounting for 47% of market activity, down from 48% in 2011.
Among cross border players, Europe is the biggest target market, attracting 51% of capital, up from 45% in 2011. By contrast Asia speaks for 31% of cross border investment and the Americas 18%, down from 20% in 2011.
‘Global capital flows from sovereign wealth funds have been dominating the market notably from North American funds but with a very diverse base including rising Far and Middle Eastern interest as well as more European buying. To date, the move of global pension funds has been led by Canadian and Far Eastern money but Australian funds are becoming more important as pension allocations there are raised further,’ said Greg Vorwaller, head of global capital markets at Cushman &Wakefield.
‘More Far Eastern and Central Asian players will also be looking to go global and more Chinese funds will also add to the weight of capital in the market in the short term. Family offices and high net worth individuals are a key part of global demand, and again a very diverse group coming from all corners of the globe. Most adopt a safety first approach as long term players and high quality trophy assets in gateway cities are favoured across a broadening lot size range,’ he added.
According to David Hutchings, head of EMEA research at Cushman & Wakefield, there is a growing consensus that the markets are past the worst for the risk cycle and that 2013 risks are weighted towards the earlier part of the year which if proven true will support a more marked pick up in confidence and hence activity later this year.
‘There will be a very polarised landscape in terms of risk and performance: by country, city and sector, and a key theme of the year will be about finding value in second tier markets as investor yield demand grows and as cost sensitive occupier interest grows,’ he said.
North America is expected to be a favoured market in 2013 despite ongoing political and fiscal uncertainties. Early signs of a recovery in occupational demand together with an improving economy and debt market, low vacancy and high liquidity augers well for investment demand and performance. As a result, a 15 to 20% increase in investment activity is forecast, alongside modest cap rate contraction, led by the best second tier markets, and a steady normalisation in occupational markets and hence some rental growth.
Improved macroeconomic conditions with sustainable growth across the Asia Pacific region will boost activity and performance resulting in 15 to 20% increase in investment activity forecast. Investment demand will increase as faith grows in China's soft landing but demand will also broaden and other markets such as Australia and Japan will be an increasing target for overseas investors while markets such as India and Indonesia are likely to be on the rise. Long term trends such as urbanisation and the increasing middle class will add to demand to access a range of sectors including residential, especially in Chinese cities as well as higher growth markets as Indonesia and Vietnam.
John Stinson, head of capital markets in Asia Pacific for Cushman & Wakefield, said there are clear opportunities in all sectors. ‘In office we expect global banks to follow regional banks in expansion plans fuelling office demand and generating steady rent growth in the major gateway markets of Tokyo, Shanghai, Hong Kong, Singapore and Sydney,’ he said.
‘Retail will be boosted by strong retail turnover growth off the back of buoyant GDP forecasts this year with Kuala Lumpar, Bangkok, Beijing and Jakarta likely to benefit the most. Overall the hottest sector this year will be logistics with major hubs of Osaka, Tokyo, Shanghai, Hong Kong and Singapore with strong demand and investment activity anticipated,’ he explained.
‘For value add opportunities we see strong interest in Indonesia and Malaysia which have performed strongly during uncertain global markets and continuing strong sentiment for India which is now offering some of the most attractive returns in the region,’ he added.
Stronger trading is forecast for European markets 2013 but in an increasingly diverse market. The report says that European investment activity is likely to remain subdued in the short term by the lack of quality product and affordable financing but the signs are that more stock released by the banks, the public sector and corporate owners should produce greater activity in 2013 generating a modest 5% increase.
‘The supply of investment stock generally is likely to improve meanwhile as banks increasingly release legacy assets through loan and real asset sales. Although we do anticipate more buyers going up the risk curve in 2013, core markets and strategies are likely to dominate again. Germany in particular will remain a top pick for most investors, with a further gain in its market share forecast in 2013, as in the Nordics. London and Paris are also likely to benefit from the safety first attitude,’ said Michael Rhydderch, head of European Capital Markets at Cushman & Wakefield.
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