CHICAGO—JLL just published data that show the amount of commercial real estate investment throughout the globe hit a record high in the fourth quarter. The results come at a time when many experts say major economies like China, Japan and continental Europe have begun to look a bit shaky. Real estate, however, seems to have increased its appeal. Investments in the year's final quarter reached US$218 billion, boosting volumes for the entire year up to US$700 billion, an 18% increase over 2013 and nearly equal to the peak year of 2006.
Furthermore, it was the Asia Pacific and European regions which experienced the most impressive rush of activity. Investments in both were up 40% in the fourth quarter compared the third.
“Asia Pacific had been lagging for most of 2014, but a strong final quarter brought it in line with 2013 levels,” says Arthur de Haast, lead director of JLL's international capital group. “The Americas and Europe have been the driving forces of global growth, with economic recovery in the US and UK as key components.”
And despite the clouds on the horizons of some regions, JLL officials remain optimistic. “Despite more uncertainty in the world than a year ago, we expect direct real estate to continue to hold its appeal in a low interest rate environment,” says Steve Collins, JLL's managing director of the international capital group. “We are forecasting transactional volumes between US$730 and US$750 billion in 2015, which would be the sixth consecutive year of volume growth."
The Asia Pacific and European regions may have had a good quarter, but it was the Americas that continued to lead the world with investments of US$298 billion in 2014, about 24% percent higher than the previous year. The US market contributed a lot to this performance, with volumes in the fourth quarter reaching almost US$85 billion, 6% higher than the same period in 2013. Brazil and Mexico also had good momentum throughout the year, but Canada was slightly down over its 2013 performance.
European volume in 2014 grew 21% to US$267 billion. The big three of the UK, France and Germany grew 17%, but it was the smaller markets that really sped up. Volume for the Nordics, for example, was up 41%, Central and Eastern Europe grew 51%, Benelux 61% and Southern Europe 70%.
The Asia Pacific region had a stronger final quarter than expected, JLL officials say. It recorded total investments of US$42 billion in the fourth quarter, almost 40% higher than in the third and the most ever for Asia Pacific. Much of the surge came from China and South Korea, even though both had underperformed during the rest of 2014. For the full year, volumes hit US$128 billion with Australia increasing 17% and Japan going up 4%. China, however, was still down 20% despite its strong final quarter.
“After such a strong run up in transactional activity over the last six years, 2015 growth looks like it may be slightly more subdued as investors weigh their next moves,” JLL's global capital markets research director David Green-Morgan says. “However, the macro drivers of investment into real estate remain, fund raising was robust in 2014, institutions continue to allocate more money to direct real estate and emerging economies are relaxing the rules on the export of capital.”
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Brian J. Rogal
Brian J. Rogal is a Chicago-based freelance writer with years of experience as an investigative reporter and editor, most notably at The Chicago Reporter, where he concentrated on housing issues. He also has written extensively on alternative energy and the payments card industry for national trade publications.
