Cushman & Wakefield: Global Property Investment Volumes to Hit US$1.33 Trillion in 2014

Cushman & Wakefield's International Investment Atlas outlook revealed

HONG KONG, March 13, 2014 /PRNewswire/ -- According to Cushman & Wakefield's latest International Investment Atlas, published today, the global property investment market delivered US$1.18 trillion (HK$ 9.20 trillion) of transactions in 2013 -- a 22.6% increase on 2012 and the highest total since 2007.

Global real estate investment turned a corner in 2013 with market activity and values picking-up as recessions ended, business sentiment rallied and increased liquidity affected most global markets.  This strong annual performance has also helped to push prime yields back down to pre-crisis levels.

Looking forward to 2014, Cushman & Wakefield is forecasting a 13% increase in investment globally to US$1.33 trillion (HK$10.37 trillion), with the US and Western Europe predicted to drive the uplift in activity.

David Hutchings, head of EMEA investment strategy, said: "The real estate market ended 2013 on a high on the back of greater confidence and rising liquidity. That momentum is building further this year with signs of a firmer occupier market as well as greater investment demand and new sources of debt set to drive investment activity and property pricing higher."

Regional trends

All regions saw a positive trend over 2013 but developments within each became more diverse.  Asia, for example, led the way for volumes thanks to growth in mainland China as well as Japan and Australia but this had to offset declines in Taiwan, India, South Korea, Hong Kong and Thailand.  Interestingly in EMEA, while trends were again diverse, the upturn was broader than in recent years. The UK and Germany are still driving the majority of regional growth but Russia, Italy, Spain, the Netherlands and Belgium are all posting marked increases. UAE, Israel and South Africa in the Middle East and Africa sub-regions also experienced strong growth.  At the same time, markets such as France, Sweden and Poland did little more than keep pace with 2012 while Norway, Switzerland and Denmark all fell back.

The Americas meanwhile failed to be the driver behind global growth for the first time since 2009 but still produced a very strong outturn driven by the US and a significant upturn in Mexico along with a stable showing from Canada.  By contrast, Brazil saw a decline in volumes as did a number of smaller markets such as Argentina.

Hutchings added: "Core markets remain in high demand but a search for stock, for yield and for performance has rapidly led investors to look further afield. Selected emerging Asian markets, second tier US cities and Southern Europe were back in favour in 2013 and that recovery is set to deepen this year.

"If investors can see past the politics, the US market must be strongly placed to outperform in 2014.  All fundamentals of supply and demand point to good growth and the US market will be increasingly a target for international capital.  A further improvement in the finance market is likely as CMBS comes back, helping the push into second tier markets."

Cross-border investment

In all regions, foreign investors grew in significance and their activity rose by 24.3% over the year versus a 22.3% increase in domestic demand, delivering a slightly increased market share of 17.6%. A significant shift in the nature of cross-border players is taking place however, with global as opposed to regional investors coming to the fore. Regional investment rose 13% while global investment was up 36%, driven particularly by investment into EMEA.

The main source of international capital is the Asia Pacific region, accounting for nearly 40% of all non-domestic spending. The majority of this is invested within the Asian region however. Looking at global rather than regional spending, it is North American investors who very much drove the market, investing US$43.8 billion, 43% of the total spent outside an investor's home region. However, the fastest growing source of global capital is no longer North America -- Asian investors increased their spending outside their region by 88% while Middle Eastern Investors beat that, increasing spending by 96%. By contrast, North American investment outside the Americas rose 23% and European investment outside the region was virtually flat.

Asia Pacific: 7-8% rise in activity in 2014

Asia Pacific saw the fastest growth in investment volumes of any region in 2013 with a 25% increase delivering a year-end volume of US$568.6 billion, 48% of the global market. It is notable, however, that a very significant share of this related to land sales in China, which soared 37% to US$397 billion, 34% of the global total.  Asia Pacific markets are forecast to see a robust performance in 2014 against the backdrop of an improving global economy and rising domestic demand -- a further steady rise in activity is forecast of 7-8%.

Demand for prime standing investments picked up in emerging markets in the final quarter, led by China for retail and offices. Industrial had a strong year overall with core markets such as Japan and Singapore performing well and looking set to remain in strong demand.  Vietnam and Malaysia led the way for global emerging markets, bettered only by Mexico, with volumes up 58% and 37% respectively.

John Stinson, head of capital markets in Asia Pacific at Cushman & Wakefield, said: "In Asia Pacific, changing growth dynamics and a divergence in performance should be taken as an opportunity for investors to realign their investment strategy.  Parts of the region may be vulnerable to a shift in yield as capital flows change and liquidity is diverted from emerging markets by an end to quantitative easing. But at the same time, better economic performance should encourage portfolio investors seeking medium-term growth opportunities."

Global outlook

A realistic appraisal of the macro environment should support further robust demand for property as an investment.  This will be underpinned by the availability of debt and the supply of available product from profit takers, deleveraging banks, investors and developers moving up the risk curve as well as businesses and the public sector raising capital.