Global Commercial Real Estate Investment to Dip in 2018

Global Commercial Real Estate Investment to Dip in 2018

Commercial News » New York City Edition | By Michael Gerrity | February 8, 2018 9:05 AM ET

According to global real estate consultant JLL, property investors worldwide continued to demonstrate their confidence in global real estate markets throughout 2017, with investment in the final quarter hitting its highest level in three years.

Despite continued political concerns, real estate markets mirrored the global economic recovery with Q4 2017 volumes coming in at $228 billion, bringing full-year activity to $698 billion, six percent higher than 2016.

Both EMEA and APAC recorded a strong full-year performance, jumping 22% and 13% respectively, while the Americas saw volumes dip by 12% as investment in the U.S. continues to slip.

Although JLL acknowledged the market to be in an extended cycle, investor appetite for the sector has remained consistent. But JLL also reports the market is unlikely to see the same highs in 2018 as a relative lack of product combined with continued discipline are likely to cause the market to soften by five to 10 percent and finish around $650 billion.

Other global real estate capital markets Highlights by JLL include:

  • Global real estate transaction volumes for the fourth quarter of 2017 totaled $228 billion, 10% higher relative to the same period in 2016. This brings full-year volumes for 2017 to $698 billion, 6% above the total transacted in 2016.
  • EMEA closed the year on a high note as full-year volumes jumped by 22% to $300 billion, making it the most active global region. Asia Pacific followed suit with a 13% increase in activity, bringing the total for 2017 to a record high of $149 billion. In the Americas, annual investment dipped by 12% to $249 billion.
  • Foreign investors continue to favor London as the British capital led all cities in attracting cross border investment in 2017. Capital from Hong Kong represented nearly 41% of all foreign inflows to London in 2017, up from 17% the year before, says JLL.
  • Capping off what has been an exceptional year for the industrial sector, with volumes up 38% from 2016, the fourth quarter saw the closure of CIC's $14.3 billion acquisition of Logicor, a pan European portfolio of industrial assets.
  • U.S. multifamily investment maintained its momentum as volumes reached nearly $41 billion in the fourth quarter says JLL. Annual activity fell to just shy of $140 billion, about 8% lower than the record-breaking total seen in 2016, as the sector faces the potential for near-term supply risk with many urban submarkets continuing to digest elevated deliveries.
  • Global real estate markets continued their strong performance in 2017. While yields in many global markets are at record lows, healthy cash flow fundamentals have underpinned pricing. Though global markets remain liquid, the relative lack of product combined with continued investor discipline are likely to limit further growth in investment in 2018. Given this, JLL expects global investment volumes in 2018 to soften by 5%-10%, to around $650 billion.

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