Source: Jones Lang Lasalle
The world's dominant commercial real estate markets have moved into 2014 in better shape than at any time since the Global Financial Crisis of 2008-2009. Capital markets are exhibiting remarkable strength and the disconnect, that has emerged over the past two years between a more cautious occupational market, is showing signs of narrowing.
This latest edition of Global Market Perspective presents an encouraging picture of a global real estate market that is regaining its pre-crisis vigour:
- The global economy is steadily improving, GDP growth is accelerating, and higher business confidence and perceptions of fewer downside risks are spurring corporations to spend again. Crucially, the U.S. economy and real estate market look finally to be gaining some traction.
- The real estate investment market is displaying exceptional liquidity in both the equity and debt markets, with a huge weight of money chasing commercial property, as evidenced by:
- Full-year 2013 sales transactions up 21% to US$563 billion
- Q4 2013 volumes hitting nearly US$200 billion; a level not seen since mid-2007
- 24 countries achieving in excess of US$1 billion in transactions during Q4
- Several major markets registering record transaction levels in 2013, including China, Australia, Canada and Singapore
- Further prime yield compression and an acceleration in capital value growth, increasing by an average of 7.5% year-on-year for prime office assets
- Very strong competition for a limited stock of core assets is forcing investors up the risk curve, into 'non-core assets in core markets' and 'core assets in non-core markets'. For example:
- Global investment volumes in the hotel sector were up a massive 40% in 2013, while industrial transactions in Europe grew by 70%
- Second-tier cities, such as Seattle, Atlanta, UK regional cities and Osaka, are capturing a greater proportion of real estate capital
- Investors are seeking out markets that until recently were considered 'out of bounds', notably in Southern Europe where there has been a rapid change in sentiment
- Investors are also targeting value-added opportunities and moving into development in order to access product
