According to Cushman & Wakefield's 2010 Global Investment Atlas which monitors investment flows in commercial property in 56 countries, global investment volumes are forecast to rise 30% this year, hitting $478 bln. (362 bln.), led by a reviving US market. The new report launched in March, suggests that this figure is likely to be even higher if the economic recovery remains on track. In 2009, global investment volumes fell 23% to $365 bln. (270 bln.), their lowest since 2003. However as markets started to recover and global liquidity improved, investment volumes ended the year on a much stronger note rising 104% between the first and second halves of the year.
The upturn was led by Asia Pacific and most notably China, with a 39% increase in investment on 2008. China is now the largest real estate investment market in the world, with the next most dynamic recovery market, the UK, up to second and the USA down to third place. (If apartment sales are included in this figure the USA would take second place.)
Yields stabilised in most areas later last year as higher investor demand and limited supply impacted. The global average fell 20 basis points in the second half of 2009 to 7.8% and a further fall of 25-50bp is forecast for 2010.
Global rents fell 5.7%, with the worst declines coming early in 2009. Nonetheless, cautious occupiers and rising supply point to a further 5% fall in H1 2010 before prime values stabilise later this year. Across all sectors global rents fell at an annual rate of 9.2% in the first six months but this slowed to just a 2.2% pa decline in the second half, with Asian Pacific retail, notably China, and Asian Pacific and Latin American offices, leading the stabilisation. With an uncertain economic recovery however, a demand-led return of rental growth is not yet in prospect although it is increasingly clear that not all markets will follow the same trend.
Top Investment Targets
With investment growing 143% last year, it is China which is now the active property investment market in the world. Aside from the rise of China as a global market, the increasing dominance of Asia Pacific overall has been notable in the 2009 results. Eight of the world's top 20 investment markets are now Asian Pacific and a number rose up the rankings last year, with Hong Kong, Taiwan and New Zealand seeing deal volumes rise while Australia and South Korea saw a much more modest decline than the global average.
Many investors are focussing on core, more liquid markets such as the UK, France and Germany in Europe or eyeing Canada now and perhaps the USA later this year. However opportunities in today's market are apparent in all regions. Brazil for example has come out of the recession looking if anything a stronger candidate for global investors and other emerging markets such as Poland and Turkey could be more highly regarded. Asia offers a range of mature and emerging market possibilities meanwhile, such as Australian and Singapore offices or Chinese retail.
Outlook for 2010
"While challenges clearly remain and a double-dip can not be ruled out, a higher risk appetite among financiers and investors will continue to fire the market." commented David Hutchings. "With the recovery now backed by local and international players, we anticipate higher levels of activity and a total deal volume up 30% to $478bn (362bn) this year.. With investor demand for prime space running ahead of supply, yield falls will continue even without any signs of renewed rental growth. Overall, limited finance may hold back re-pricing in some areas but we still anticipate a 25-50bp fall in yields globally across all sectors, with Asia again leading the correction. Rents however are likely to drift lower and whilst they will end the year relatively stable, we anticipate a 5% fall globally, led by office property in most but not all markets."
One of the strongest increases in activity is expected in the USA, at around 50%. Janice Stanton, Senior managing dire