Global property demand increases despite low yields

real estateGlobal investment in commercial property grew by more than 10% in the first half (1H) of the year, though activity in Asia slowed and prime yields across the board reached new lows.

Data from DTZ, a real estate services firm, finds that Europe and North America were at the forefront of the 15% rise of investment flows in 1H this year compared to the same period last year.

Investment in commercial property reached $318 billion (€286 billion) in the first six months and DTZ says that the low interest rate environment is attracting more capital despite low yields.

Over the last 12 months European volumes rose 23% to $274 billion and in North America volumes increased by 18% to $311 billion. In contrast, the Asia Pacific region was 7% lower on the same period a year ago, at $90 billion of volume over the last 12 months.

Nigel Almond, head of capital markets research at DTZ, says investment volumes across Asia Pacific remained strong through the financial crisis and afterward, but in the last six months activity was stifled by a lack of suitable product and, in some markets, a mismatch between buyer and vendor expectations.

London retains its position as the most traded market at the city level with over $39 billion transacted in the 12 months to the end of the second quarter – 7% higher than a year ago.

Almond says investment in London is equivalent to nearly two-thirds of all investment in the past 12 months and the volume is similar to the inter-regional total for the next four leading cities of Manhattan, San Francisco, Chicago and Los Angeles combined.

Apart from the continued dominance of capital from global funds, North American and Chinese capital is the most predominant across all regions. The strength of North American funds reflects an increased appetite for platform deals. Norwegian, Qatari and Taiwanese capital is also growing in strength.

©2015 funds europe