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Global investment in commercial property falls 59 per cent
11 Feb, 2009, London
Global investment in commercial property fell 59 per cent in 2008 to $435bn down from 2007’s record total of $1,050bn. This was the lowest annual total since 2004 with a significant decline in investment from foreign investors. Figures in international property adviser Cushman & Wakefield’s Investment Atlas 2009 (to be published later this month) also predict that volumes will fall again this year, albeit marginally, to around $412bn.
The largest fall in 2008 was in North America with a 73 per cent drop in investment from $437bn to $116bn. As a result North America ceded its position as the top global investment target in 2007 and fell to third place in 2008 behind Europe and Asia.
There were large falls in investment outside of North America, however, with Europe declining 52 per cent to $178bn (down from $367bn) and Asia declining 45 per cent to $131bn (down from $237bn). Latin America proved to be the most resilient market with investment falling by only 9 per cent to $8.9bn (down from $9.8bn). As the world’s most popular investment destination, Europe accounted for 41 per cent of all transactions followed by Asia with 30 per cent.
At a country level the USA accounted for 25 per cent of all global investment at $107.1bn. China, for the first time, overtook the UK as the second most popular destination with $50.3bn or 12 per cent of global investment. The UK accounted for 9 per cent or $37.1bn of investment with Japan and Germany each accounting for around 7 per cent, or $29.3bn and $28.8bn respectively.
David Hutchings, head of research, Cushman & Wakefield EMEA, said: “Although virtually all global markets had a decline in investment it’s been the mature markets which have suffered most. Emerging markets now account for 22 per cent of global investment when as recently as 2006 they only accounted for 9 per cent. China is by far the most dominant of these markets but Russia, India and Brazil all increased their share of investment coming in at 15th, 16th and 20th overall.
“It is clear that pricing in many countries at the market peak was aggressive and became divorced from the reality of underlying growth and income that could be produced and sustained. It is equally true, however, that pricing may now be becoming too conservative in some markets, again ignoring the fundamental potential of the underlying market.
“On average, mature markets are now probably at least half way through the pricing correction. Globally however, it is likely to be those countries which fell first that will also be the first to recover. The US and UK markets are likely to be favoured (certainly by the latter half of 2009) and investors are already identifying value opportunities there. We also expect to see a slight improvement in demand in France and possibly Germany later in 2009 and after further falls in activity in the next few months. Latin America may also end the year well if the regional economy holds up as predicted. Asia meanwhile seems set for a further drop in activity this year before values correct sufficiently to draw in more investors. For most global markets in fact, a recovery in activity is likely in the second half of 2009, even though a recovery in performance may largely wait until mid 2010 when rental levels start to stabilise.”
The change in property pricing globally has broadly followed a west to east drift starting in the US and UK and spreading through Eastern Europe, the Middle East and now most of Asia. Recently it has been emerging markets such as Ukraine, Mexico and Russia which have seen the most significant yield increases.
Europe has been most affected by the re-pricing. All sectors have seen substantial yield shifts with Eastern Europe following the West. Shops have suffered somewhat less than offices and industrial but other retail types including shopping centres and retail warehouses are often seeing significant increases.
In North America figures show an average 31 basis point yield shift through 2008 against a 111 basis point increase in Europe. This underplays the true scale of the change in values, however, with only limited transactional evidence. Opinion and valuation based assessments indicate a US yield shift of somewhere closer to 100 basis points.
Latin American and Asian markets remained relatively robust throughout 2008 although by the last quarter the impact of the global downturn was beginning to be felt and yields began increasing.
All commercial property asset classes have been hit by the decline in investment although there have been regional differences. In Europe retail and industrial have taken share from the less favoured office sector whilst in Asia offices saw increased investment at the expense of land and development. In North America sectors reliant on consumer spending such as retail and hotels have been hardest hit but offices increased its market share with a number of trophy assets changing hands. In Latin America retail was also out of favour relative to offices.
For further information, please contact:
Chris Bond, UK Media Relations Manager
Cushman & Wakefield
Tel: + 44 (0)20 7152 5006 / +44 (0)7793 808 006
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