Around the world, commercial property investment will rise to total USD 606 billion in 2011, a growth of 5-10%, according to a recent survey.
According to Cushman and Wakefield's International Investment Atlas, the growth will be based on a massive increase in activity in the emerging Asian markets, especially China's second-tier cities. The survey also reported that the focus would shift from yield compression to rent and income growth to drive performance.
If the prediction is proved correct it will represent a marked slowdown on 2009, when global commercial property investment grew 42% to a total USD 564 billion, with a growth of 63% seen in Latin America and 27% in Asia. This is not a bad thing though; in fact it indicates a return to a more stable investment arena. Overall in 2010, investment volumes reached about 80 percent of their five-year average, the survey of investment flows in 56 countries showed. "Yields fell in most areas last year, as higher demand and limited supply impacted (prices). The global average (yield) fell 21 basis points (bp) to 7.6 percent (in 2010) and a further fall averaging 30 bp is forecast for 2011," the survey said.
According to the report half of all global investment was in Asia, followed by the US and UK. This is the second straight year that Asia has been heavily in charge of global commercial property investment. Cushman and Wakefield's managing director of Asia Pacific capital markets John Stinson said that China will remain the number one market globally, and investment elsewhere in the region will continue to grow. "With eight of the world’s top 20 markets situated in Asia Pacific, this region will continue to dominate as investors are attracted to other gateway cities, including Singapore, Hong Kong, Shanghai, Tokyo and Sydney," he said. "We will start to see some of this activity spill over into some attractive emerging markets later this year, including Malaysia, Indonesia, India and some second- and third-tier cities in China," he added.
On a city by city basis London topped the chart for investment volume, with Tokyo in second followed by New York and Paris according to the report. Greg Vorwaller, Cushman and Wakefield's global head of capital markets cautioned that 2011 would present hurdles for global commercial property markets. "There are upside risks to consider, in the potential for economic recovery to be sustained and for increasing levels of business and financial confidence to translate into greater than expected levels of market activity," he said.
In terms of deploying capital, he said investors should push diversification back up their agendas, by region, country, sector and currency, Vorwaller said.
- Friday 18 March 2011