Global economic uncertainty driving down capital flows worldwide
Global real estate consultant CBRE is reporting this week that rising global economic uncertainty has dampened commercial real estate capital flows both into and out of the U.S. in the first half of 2019.
With the longest global economic expansion on record, international investors face an increasingly complex calculus in identifying cost-effective opportunities for potential downturn protection, slowing cross-border capital flows. Inbound capital to the U.S. in H1 2019 was down by 48% from H1 2018 (about half of this decline was due to less M&A activity), and U.S. outflows were down by 18%.
However, capital from certain Middle Eastern countries increased despite the overall decline in cross-border investment.
The Inland Empire, East Bay and Boston are among the top U.S. markets still registering significant increases in global capital.
Sovereign wealth funds, insurance companies and pension funds (SWIP) together accounted for 30% of inbound volume in primary markets during H1 2019 compared with just 3% in secondary markets.
Knight Franks' latest Prime Global Cities Index, which tracks the movement in luxury residential prices across 46 International cities, increased by 1.4% in the year to June 2019, up marginally from 1.3% in March 2019 but still significantly lower than its four-year average of 3.8%.
Global real estate consultant JLL is reporting this week that after a bumpy 2018, investment in global commercial real estate cooled in the first half of 2019 with year-on-year volumes dropping by 9% to $341 billion.
For the first time in history, the average rent in Manhattan's office market topped $80 per square foot, closing the second quarter at $80.37, in a strong reporting period that also saw 8.5 million square feet of leasing activity.
The differential between U.S. rates and those in countries with lower-yielding foreign currencies has narrowed, contributing to lower hedging costs for foreign investors acquiring U.S.-dollar-denominated assets.
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