Global real estate on the rebound

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Global real estate on the rebound


Shawna Yang, head of capital markets at Cushman & Wakefield Korea

The global property investment market delivered $1.18 trillion of transactions in 2013 - a 22.6 percent 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 percent increase in investment globally to $1.33 trillion, with the United States and Western Europe predicted to drive the uplift in activity.

All regions saw a positive trend over 2013, but developments within each became more diverse. Asia, for example, led the way for volume thanks to growth in 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 United Kingdom and Germany are still driving the majority of regional growth, but Russia, Italy, Spain, the Netherlands and Belgium are all posting marked increases. The 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.

In all regions, foreign investors grew in significance and their activity rose by 24.3 percent over the year versus a 22.3 percent increase in domestic demand, delivering a slightly increased market share of 17.6 percent. 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 percent while global investment was up 36 percent, driven particularly by investment into EMEA.

Pension and sovereign wealth funds remain more focused on Europe than other regions with 59 percent of 2013 commercial investment (excluding land and multifamily) heading toward EMEA, followed by 28 percent for the Americas and 13 percent for Asia. Country targets were relatively similar for the two with the United States and the United Kingdom dominating, as they do for most investor types.

Asia Pacific saw the fastest growth in investment volumes of any region in 2013 with a 25 percent increase delivering a year-end volume of $568.6 billion, 48 percent of the global market. It is notable, however, that a very significant share of this related to land sales in China, which soared 37 percent to $397 billion, 34 percent 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 percent to 8 percent.

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 percent and 37 percent respectively.

For Korea in 2013, core investment-grade office buildings on the market for sale attracted multiple interested investors. Most of the interested parties were local institutional investors. However, we do notice an increasing number of overseas investors waiting on the sidelines for core Seoul office investment opportunities. In 2014, we forecast the trend to continue and the competition to increase among local and overseas investors. Some investors holding core office assets may decide to put the assets for sale earlier than planned to benefit from the increased competition.

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.

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