This article is from the Australian Property Journal archive
GLOBAL real estate transactions have climbed to their highest level in eight years, to US$407 billion, with Australia coming in fifth place, according to CBRE.
CBRE’s latest research shows commercial real estate topped US$407 billion in H1 2015, the strongest first half to a year since 2007, and up 14% year-over-year.
The US, UK and Germany accounted for the bulk of CRE deals with a combined total of US$301 billion was transacted in these three countries in H1 2015, representing (74%) share of the global market and 10% above the long-term average of 64%.
Australia was ranked fifth with US$10.3 billion in investment.
The Americas experienced growth of 31%year-over-year. The USA recorded US$222.4 billion in deals.
A strong dollar impacted activity in EMEA (Europe, Middle East & Africa) and Asia Pacific (APAC).
In dollar terms, EMEA was up just 5% from H1 2014, with APAC down 19% year-over-year. When measured in local currency EMEA grew by 25%, while a decline in APAC was more muted at 9% year-on-year.
Australia was a notable exception as sales continued to increase on the back of high levels of offshore investment.
The UK reported US$54.6 billion, Germany with US$24 billion and Japan with US$13 billion.
CBRE global research director Iryna Pylypchuk said capital flows into real estate are well supported. Even ignoring rental value growth, real estate offers a ‘spread’ over bond rates of between 200 to 300 bps across global markets and capital will continue to be attracted to the sector.
“The influx of new sources of capital targeting real estate as part of long-term liability-matching allocation strategies is helping to extend the investment cycle. At the same time, this pushes the ‘old capital’ into niche sectors, prompting expansion of the investment universe,” she added.
In terms of cities, London was the most popular followed by New York, Paris and Sydney.
At a regional level, the influence of global investors varies from as little as 10% in the Americas, to almost 50% of the market in EMEA. The largest contributor to these flows during H1 2015 was the US, accounting for a stand-out US$25.4 billion of investment outside its home market. The next three largest sources were Canada ($US8.5 billion), Germany (US$7.1 billion) and China (US$6.6 billion), with their combined volume still considerably less than the US
CBRE’s global president of capital markets Chris Ludeman said the influence of global capital is growing to the point that these investors are becoming the “market-maker” in setting the price in the most desired and liquid markets across the globe.
“Within this growing wave of cross-border capital, there are elements of old and new.
“A recurrent wave of US equity funds continues to explore global opportunities in search of higher returns off the back of strong buying power of the US dollar. German capital is searching for steady investments outside their home market – a notable shift in strategy post-GFC. Despite low oil prices, Middle Eastern buyers remain active, with the investor base growing and strategies targeted at greater geographic and sector diversification,” he added.
Ludeman said there are numerous new sources of capital that have emerged only recently.
“With its commodity driven economy slowing, Canadian investors have sought opportunities abroad. The lower oil price has triggered and accelerated global deployment of capital from the Middle East’s non-institutional investors, particularly private high net worth.
“However, of all the new sources, Asia has been the most captivating due to the size, speed and potential long-term impact brought by the recent regulatory changes; this has allowed many of the local pensions funds and insurance companies to invest globally for the first time,” he continued.
CBRE’s Pacific executive managing director, capital markets, Mark Granter said Australia continued to attract a high share of cross border investment activity, with Sydney ranked number four globally in this regard.
“The decline in the AUD and the higher yields/returns in this market are continuing to attract offshore buyers.
“Given the current level of transaction activity in Australia, we are on pace if not exceed the record $29.6 billion in annual sales recorded during 2014,” Granter said.
Meanwhile the report found the USA was the main source of capital in the global CRE market with US$25.4 million followed by Canada (US$8.46 billion) and Germany (US$7.12 billion).
Australian capital in the global CRE market was US$2.92 billion.
Australian Property Journal
