Demand for real estate overcomes geo-political worry

Investment in global commercial property has reached a record level after an 18% rise over 12 months.

Investment stands at $1.8 trillion compared to $1.5 trillion last year, according to research to the end of August from Cushman & Wakefield.

The firm placed significance on the inability for geo-political uncertainty and the slowing economic cycle to halt the rise in investment.

Cushman & Wakefield’s ‘Winning in Growth Cities’ report said Asian investors led the increase and that Asia was also the main recipient of investor allocations. Investment in Asia accounted for 52% of all activity and Asian buyers were responsible for 45% of all cross-border investment.

New York was the largest real estate city market in the world, followed by Los Angeles and London, with Paris rising strongly to take fourth spot ahead of Hong Kong.

Hong Kong was up 68% compared to 2017, giving it a rise of three places to become the first city from the region to make the global top 5 for three years.

Carlo Barel di Sant’Albano, head of global capital markets at Cushman & Wakefield, said: “There is no shortage of capital targeting real estate across myriad geographies and risk profiles. Indeed, we are seeing many investors increasing their allocations to real estate and they are evolving their strategies to allow for variable supply and risk tolerances.”

Volumes could exceed current levels by up to 2% next year, Sant’Albano said.

Colleague David Hutchings, an investment strategy chief at the firm, said there were “clear, and many would say growing, risks in the macro environment”, but little to suggest the cycle was set to end or that a recession was looming.

“Inflation is proving to be less of a threat than feared as we continue to enjoy steady economic growth. However, price signals will be enough to keep central banks in a tightening mood in most areas and the slow but sure rise in interest rates, and reduction of quantitative easing driven liquidity, will therefore continue.”

Hutchings added: “What may be new in the year ahead is the potential for supply to increase as some switch strategy and take profits, others get caught by rising borrowing costs and a need to raise capital, and more seek out partners to jointly invest and develop.”

©2018 funds europe

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