Global Real Estate Investment Falls for First Time in Five Years; Strong 2014 Finish for Asia Pacific Real Estate Investment

HONG KONG, March 26, 2015 /PRNewswire/ -- Global real estate investment fell in 2014 for the first time in five years, dropping 6.3% to US$1.21 trillion, according to research published today at MIPIM by global real estate adviser Cushman & Wakefield.

This decline in activity can be solely attributed to a drop in Chinese land purchasing -- however, most of the market is in rude health and set to improve further still in 2015, according to Cushman & Wakefield's annual global capital markets report International Investment Atlas.  Indeed, the report forecasts global investment volumes to rise by 11% in 2015 to US$1.34 trillion, led by Europe and the US.

Cushman & Wakefield's head of Asia Pacific Research, Sigrid Zialcita,

said: "Investors have generally shown a propensity to hold and are moving into assets that have the ability to generate a stable source of income or returns. This is largely due to the evolving investor base, as more sovereign wealth funds, pension funds and private equity have increased allocation to the region's real estate.

Regional Trend

Asia Pacific (Including China Land Sales) underperformed in 2014 with a 23.6% fall in activity but it did at least end the year strongly, with volumes rising in Q4 for the first time in a year; according to research published today at MIPIM by global real estate adviser Cushman & Wakefield.

Zialcita added: "Property cooling measures in mainland China, Singapore and Hong Kong have had a huge impact on investment activity in the region last year, diverting capital towards Tokyo, where policies were more conducive, as well as to Seoul and Sydney, where fundamentals in occupier markets were showing signgs of improvement, in addition to their higher yields. Inter-regional outflows also picked up pace as Asian investors increased their asset holdings in London and New York."

Land aside, global volumes rose 9% and the region in fact saw modest growth (1%) last year despite tightening measures being upheld. Stripping out land, China was also up, rising 5% thanks to stronger retail and hospitality demand.  Across the region, offices were the only sector to see a net gain for the year, mirroring their better performance in occupational terms. 

Cross Border Investment

By activity, the USA has moved back to the top for the first time since 2009, with volumes rising 16.2% to USD 390.6 bn, 16% ahead of China. These two of course dominate global activity with a combined 60% market share but domestic investment is key for both. Notably, Singapore and China were the third and fourth largest source of cross border capital respectively, where cooling measures are prevalent, which shrinks the number of investment targets and consequently, increases the need for diversification. Chinese outbound investments also rose under more relaxed government guidelines. Globally, Asia Pacific was the second largest source of cross-border capital, where over half were accounted for by inter-regional investments.

Eight of the top 20 country targets are in Asia, including mainland China, Japan, Australia, Hong Kong, South Korea, Singapore, Taiwan and India. New York is the largest city target, while London, Tokyo, Los Angeles and San Francisco complete the top 5.

Investment in Asia Pacific region

The Asia Pacific region is expected to see a return of volume growth in 2015, with land markets stable but a steady increase for built commercial space pushing overall volumes up by 0-5%.  Alongside this, further modest yield compression is likely in line with the low level of interest rates and supported by steady rental growth.

Cushman & Wakefield's head of Asia Pacific capital markets, John Stinson, said: "Demand for office investment in core markets is expected to remain strong, spurred by rental growth in key markets such as Singapore and Tokyo as well as opportunities in Sydney's urban regeneration projects. As the world's markets remained flushed with liquidity, competition for assets will compel investors to turn the spotlight on secondary markets and core-plus opportunistic strategies.

"There will be a diverse range of opportunities as a result, with core markets as well a wide variety of higher growth markets led by China and India. Southeast Asian markets also offer immense potential as they develop, with economic integration and continued investments into infrastructure developments a key driver of property fundamentals, particularly in commercial and industrial assets."

For international players, now may be the right time to increase allocations to China to build up RMB exposure and as further government stimulus may be seen to spur corporate growth.  China has to be carefully analyzed to find the right opportunities however. The tier one cities of Shanghai and Beijing currently offer opportunities for super prime offices for example; for retail, the less crowded tier two cities, focusing on locations in the orbit of tier one cities, such as Suzhou and Hangzhou, may be preferred. 

About Cushman & Wakefield

Cushman & Wakefield is the world's largest privately-held commercial real estate services firm. The company advises and represents clients on all aspects of property occupancy and investment, and has established a preeminent position in the world's major markets, as evidenced by its frequent involvement in many of the most significant property leases, sales and assignments. Founded in 1917, it has 250 offices in 60 countries, employing more than 16,000 professionals. It offers a complete range of services for all property types, including leasing, sales and acquisitions, equity, debt and structured finance, corporate finance and investment banking, corporate services, property management, facilities management, project management, consulting and appraisal. The firm has more than $4 billion in assets under management globally. A recognized leader in local and global real estate research, the firm publishes its market information and studies online at www.cushmanwakefield.com/knowledge. In Greater China, Cushman & Wakefield maintains seven market-leading offices in Beijing, Shanghai, Chengdu, Guangzhou, Shenzhen, Hong Kong and Taipei. More information is available at www.cushmanwakefield.com.