Political and economic uncertainty remained front and centre in the first quarter of 2019 and this was reflected in global real estate markets, with investment dipping by 8% from the first three months of 2018 to US$156 billion. Declines in the Americas and EMEA outweighed a record-setting performance in Asia Pacific as global activity dropped to its lowest quarterly level in two years.
Despite investor concerns, global commercial real estate is poised to maintain its steady performance. Though property yields remain compressed, falling risk-free rates have helped to keep real estate investment an attractive option for investors. Meanwhile, capital values and rents are both predicted to edge up in 2019. In this environment we expect full-year global investment in commercial real estate to decline by about 5%-10%.
Sales activity in the Americas tapered off moderately during the first quarter of 2019 as investment volumes decreased by 8% from the previous year to US$62 billion. While volumes in the U.S. fell by 5%, none of the region’s other markets were able to better their performance from the first quarter of 2018 as Canada, Brazil and Mexico all posted year-on-year declines.
EMEA investment volumes during the first quarter were 22% lower than a year earlier and totalled US$50 billion, reflecting a noticeable change in momentum from the middle of last year. This was the result of a broad-based slowdown as most major markets registered a decline in transactions. While demand for real estate remains robust, there are several factors constraining activity, including Brexit uncertainty in the UK, the region's largest investment market, a lack of suitable product and elevated pricing.
Yet another record was broken in Asia Pacific as first quarter investment volumes totalled US$45 billion, 14% better than Q1 2018 and marking the region’s best-ever first quarter performance. Cross-border purchasers stepped up interest in the region, with acquisitions at their highest level in 12 years. Much of Asia Pacific’s growth was driven by a flurry of activity in China, where quarterly investment hit an all-time high. Meanwhile, higher volumes in South Korea and Singapore helped to offset decreases in Hong Kong, Japan and Australia.
Prime office capital value growth has gradually decelerated over the past year to an annualised rate of 5.5% (across 30 major office markets), compared to 7.2% in Q1 2018. Capital appreciation continues to be underpinned by steady income growth. Amsterdam is the stand-out global performer with annual capital appreciation running at over 30%, while Madrid, Frankfurt, Singapore and Boston have also registered strong capital value growth over the past year. For the full-year 2019, capital value growth for prime office assets is forecast to slow to around 3%.
Recent investment transactions
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