Worldwide CRE Investment Reaches New High
Global commercial real estate investment reached a new high–$1.62 trillion–in 2017, Cushman & Wakefield reported from the MIPIM international real estate conference in Cannes, France.
The U.S. remains the main target for international investors, but its lead has fallen as Europe attracts more cross-border spending, the firm’s Global Investment Atlas 2018 said.
“Global real estate performed exceptionally well in 2017 with volumes up sharply and increasing valuations,” said Cushman & Wakefield Global Capital Markets and Investor Services Chief Executive Carlo Barel di Sant’Albano. “This has provided good momentum and the balance of pricing, supply and demand all point to a further healthy year.”
di Sant’Albano said he expects to see a small gain in global volume this year due to more development, an increase in profit-taking and more corporate activity.
Despite the U.S. economy’s “outperformance,” North American investment activity declined 6.9 percent last year, the report said. Both global and domestic buyers drew back, but Canadian investment grew at its strongest rate in five years at 12 percent.
There are “record levels” of dry powder being aimed at the U.S. right now, Cushman said. As a result, the outlook for the rest of this year remains strong, with deal activity set to rise even though a shortage of big-ticket sales may keep volumes flat.
“Perhaps the strongest reason for cheer at present is the health of the economy and the globally synchronized nature of the upturn we are seeing,” said Cushman & Wakefield Head of Europe, Middle East and Asia Investment David Hutchings. “The increase in real estate development and forward funding in 2017 shows that investors already recognize this, but the strength of the occupier market may yet surprise in the year ahead.”
Threats such as trade wars could cut the current real estate cycle short, Hutchings noted. “But as solid economic momentum and tighter labor markets encourage more business investment, the cycle is still likely to be extended,” he said. He cautioned about what could be a rising trend in inflation, but said the pace of interest rate tightening should remain slow and monetary policy will be “stimulative” for much of 2018.
“As such, rising confidence will release more funds for investment and speculation, spurring the cycle on but with a changing emphasis from income to growth,” Hutchings said. “As a result, capital flows will be dynamic and investors must look past the current noise in the market. They need to focus on growth, taking advantage of areas of structural and cyclical change, while at the same time getting ready for tomorrow by assessing how to de-risk their portfolios to be ready for future changes.”
