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All regions saw a strong uplift in activity, with the real push coming from Europe and Asia, up 50% and 48% respectively. With investment volumes of US$248bn (€191bn), the US accounted for 39% of global activity down from 46% in 2005. Europe increased its share from 41% to 46% and Asia from 13% to 15%.
Cross-border capital continued to be the dominant force during 2006 and now represents 29% of the total global market up from 25% in 2005. Europe continues to have the strongest penetration of cross-border investors which now account for half of all investment in the region. Asia has seen activity from foreign buyers rise to 32% from 28% whilst US and Canada saw a more moderate increase of 13%.
These latest findings are contained in the 2007 Cushman & Wakefield International Investment Atlas which has been launched at this year’s Cushman & Wakefield’s Global Capital Markets Conference, held in Paris on 1st February.
David Hutchings, Head of Research at Cushman & Wakefield EMEA said: “The flow of new money targeting real estate continues to escalate as investors are drawn to its relatively stable and recently very strong returns. Despite most markets entering a period of potentially slower economic growth, current indicators point to continuing high investment volumes through this year, suggesting that yield compression may not yet have run its course – at least for the best property.”
David Hutchings continued: “ The development of the global REIT market is likely to drive an increase in M&A/corporate activity during the year which may divert capital from direct property acquisitions hence reducing global property flows. However this is symptomatic of the increased weight of capital targeting real estate and opens the door to more trading activity in 2007/08. Our current global forecast for 2007 is $681bn (€516bn) with European volumes expected to exceed $317bn (€240bn).”
European countries dominate top 10 global investment markets
Total investment in Europe in 2006 stood at $295 bn (€223bn) with the region taking 6 of the places in the list of the top 10 global investment markets.
Central & Eastern Europe, most notably driven by Poland and increasingly Russia, now accounts for 5.5% of total activity in the region up from 1.1% in 2001. Turkey is showing steady progress with levels of activity expected to accelerate to a new level this year while Romanian activity increased nearly threefold.
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Germany was the most dynamic market with deal volumes more than trebling in the year as investors look to take advantage of the economic recovery in a market where stock is relatively more accessible compared to other European markets. Singapore saw volumes double whilst Japan and France saw volumes rise by more than 50%.
Cross-border investment to gather pace in 2007
The strong increase in cross border investment seen this year will be a continuing theme in 2007 as the search for investment opportunities, diversification and higher reward or lower risk prospects continues to draw investors into new markets by geography and sector. The growing sophistication of the real estate market globally will only help to open up opportunities to meet this demand.
Michael Rhydderch, Head of Cushman & Wakefield Cross-Border Capital Markets, EMEA
”Emerging markets such as Russia, Turkey, India and Brazil are increasingly being sought after and not just by opportunistic buyers. Potential gains from yield compression in these and other emerging markets are still present however, it is now clearly arguable in some of these markets, that risk is being under-priced as we enter a period of potentially slower economic growth. This is likely to result in a re-rating of pricing looks where appropriate in some second tier markets. Investors will continue to focus more on the best assets in the best locations and indeed, may pay a further premium to buy into these long term holdings - particularly perhaps as the REIT markets develop further and look to lock in key assets.”
Michael Atwell, Partner and Head of Capital Markets Group in Poland, said, ”Looking to 2007 investors are still keen to invest in CEE but are being far more selective and focusing on investment opportunities where they can create capital value growth through asset management initiatives, development possibilities and income enhancement. There is a shift now towards regionalisation with many investors seeking investment opportunities in the smaller to medium sized towns, particularly for retail development opportunities in city centre locations and/or office buildings in the major secondary cities. In Poland investment volumes in 2006 reached approximately €4.5 billion and this level of activity is expected to continue with strong investor demand still being shown. The final volume will be dependent on some potential portfolio sales which can form a large percentage of total market volume - as with last year and the sale of the Casino portfolio.” |
