CHICAGO—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 yesterday by Cushman & Wakefield. But the firm attributed the decline to a drop in Chinese land purchasing, and reported that “most of the market is in rude health and set to improve further still in 2015.”
In fact, excluding China land sales, global volumes rose 9% in 2014, C&W found. Volume in the Americas surged ahead 11.4% and now stands at 71% of its 2007 peak, with the US taking over from China as the world's largest real estate investment market. Europe saw an 11.8% gain, a gap which would have been more significant “had it not been for the strength of the US dollar,” C&W said.
The firm's annual global capital markets report International Investment Atlas forecasts that global investment volumes will rise by 11% in 2015 to US$1.34 trillion, once again led by gains from Europe and the US.
“The 2014 pick-up was better than many predicted this time last year but the 2015 outlook is stronger still, with the brakes now coming off the market,” says David Hutchings, head of EMEA investment strategy at C&W. “Not only do we have strengthening global liquidity thanks to low interest rates and an expansion in quantitative easing, we also have the start of stimulus measures by China, signs of deeper reform in more markets and an improvement in the fundamentals for the occupier in many areas.”
A key factor in the coming year will be an increased occupational demand that lessens the risk of a bubble and bolsters the underlying strength of a broader array of markets. Investors will continue to focus on core regions, but opportunities should develop in new areas including emerging markets.
“There's more risk out there at a global and a local level and core markets will remain in demand as a result,” says Jan-Willem Bastijn, head of EMEA capital markets at C&W. “However, interest is already spreading to new locations in search of yield and stock, whether we are talking about the rediscovery of the fringe markets of Europe, the drift to decentralized as well as second or third tier US cities, or the growth in demand for new sectors in Asia.”
Looking ahead to 2015, C&W expects rising values from yield compression and an increase in US activity, along with growth in US rents, to drive another strong performance by the Americas. The firm forecasts a volume growth of 15% for North America and an 8% boost for Latin America.
“In the US, leasing markets were slower to respond to the Fed's stimulus than investment and finance, but they too are now rising and with supply tightening, growth pressures and development opportunities are emerging in a range of cities and sectors,” says Janice Stanton, a senior managing director in C&W's US capital markets group. “The initial investment rush for core product in gateway cities has now long since been followed by a second and third wave of capital looking to develop in these same top markets or to spread towards second-tier, decentralized or higher risk markets.”
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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.
