The global real estate investment market continues its path to recovery with both values and sales activity increasing in the first quarter of 2011, according to the latest research by leading global property adviser CB Richard Ellis (CBRE).
CBRE's new Global Capital MarketView report analyzes global capital environments across Europe, Middle East and Africa (EMEA), Asia Pacific, and the Americas, including office capital value trends, development completions, debt financing availability, global investment volumes, cross-border capital flows, and yield spreads.
The CBRE Global Office Capital Value Index increased 12% year over year (y-o-y) in Q1 representing a strengthening of the positive trend evident for the past three quarters. In the Americas, capital values increased by 9.5%, while the Asia Pacific region experienced strong growth of 18.9%.
The EMEA region has essentially been flat over the past several quarters as capital values rose just 2.6% in Q1 2011 - slightly lower than its last reading. However, the most highly regarded markets, such as the United Kingdom, France, and Germany, are witnessing relatively stronger increases in capital values for prime properties.
Global investment activity also continued to improve during Q1 2011, with investment volumes increasing by 22.9% y-o-y. The Americas experienced the most substantial increase of 77.2% y-o-y. Asia Pacific weathered devastating natural disasters in both Japan and New Zealand during Q1 2011 that hindered short-term quarterly investment volumes for the region as a whole and resulted in an increase of just 5.5% y-o-y.
EMEA continues to be affected by the European sovereign debt crisis, which is impeding much of the region's recovery; as a result, transaction volumes increased by just 35.4% y-o-y. EMEA recorded the greatest transaction volumes at US $41.9 billion in Q1 2011; however, this amount is below its quarterly average of US $51.7 billion, which again reflects continued uncertainty and caution arising from the sovereign debt crisis.
Dr. Raymond Torto, CBRE's Global Chief Economist, commented: "The German market in particular has seen rapid growth in property investment turnover, perhaps influenced by the fact that its economy has been one of the most robust in the region over the last year; both local and international investors have been active, with the retail sector attracting a high share of investment activity.
"The Central and Eastern Europe (CEE) region also stands out, with investors attracted to the higher yields on prime property compared with the main Western European markets. Investors remain very wary of taking short leases or secondary locations, so competition for prime assets in major cities is intense."
The limited number of active lenders has also hindered growth in investment activity in the EMEA region. The debt capital constraints, together with higher interest rates in the Eurozone, are restraining transaction levels. Nevertheless, EMEA's sales volume grew 35.4% y-o-y in Q1 2011.
Dr. Raymond Torto added: "Lenders have not forgotten the legacy of bad debts that remains from the global crisis period. Although some new players have entered the market, their interest is mainly in cherry-picking the best deals and providing senior debt for transactions involving high-quality, core property."
Findings in the report include:
Global capital value trends: offices
- In the EMEA region as a whole, capital values started to recover in late 2009, but these increases concealed a wide differential in trends at the city level. For example, office rental value growth has proven more robust in London and Paris than elsewhere in the region.
- The CB Richard Ellis Prime Office Capital Value Index for Asia Pacific increased a significant 18.9% year over year - the largest increase since Q2 2008 and twice the next-largest increase for the period, which was in the Americas.
- Capital Values in the Americas have mainly increased in the major markets such as New York, Washington, DC,