$165 Billion Invested Worldwide in Commercial Assets in Q1
According to a new report JLL, despite trade tensions and elevated stock market volatility, investors are still seeking value in real estate with global investment in the first quarter of 2018 hitting the highest Q1 level in 10 years at $165 billion.
After a record-breaking 2017, investment in Asia Pacific hit yet another high in Q1 at $40 billion while EMEA also started the year off on a strong footing. After four consecutive quarters of declines, the Americas saw growth in Q1 with investment activity rising by 18% to $68.8 billion.
The growing prominence of debt financing, M&A activity, and alternative sectors all demonstrate that while the way investors access the sector may be shifting, their appetite for real estate has not diminished.
Fundamentals in many markets remain strong, but we expect investment to soften by 5 to 10 percent, to around $650 billion, as investors pursue real estate through new avenues outside of traditional single-asset acquisitions.
JLL further reports the following global market highlights in the first quarter of 2018:
- Marking the most active first quarter since 2007, global transactional volumes for the first quarter of 2018 totaled $165 billion, 15% higher than the same period last year.
- Activity in the Americas reversed course after four consecutive quarters of declines in 2017 as investment grew by 18% in the first quarter of 2018. Meanwhile, first quarter investment in EMEA was flat. Asia Pacific, on the other hand, continues to shatter records as Q1 volumes rose by 34% to their highest level documented, bettering the previous record set in the first quarter of 2008 by 22%.
- London has lost its spot as the world’s most traded city and fallen to third place after four consecutive quarters atop the table. Taking its spot is Tokyo, which just edged past New York to become the world’s most liquid real estate market in the first quarter of 2018.
- Investor appetite for industrial assets has shown no signs of subsiding as the sector recorded year-on-year investment growth of 35%. This is the fifth consecutive quarter of double-digit investment growth, representing the best performance of any asset class.
- Private closed-end real estate funds raised $33 billion in the first quarter of 2018, setting themselves up to match the total achieved in 2017. Leading the way were funds targeting opportunistic strategies, which raised nearly two-thirds of the total.
- While liquidity is strong and occupier fundamentals remain supportive, we expect investment in commercial real estate globally to soften by 5%-10%, to around $650 billion for the full-year 2018. With limited capital appreciation anticipated in the near term, investors will focus on protecting income.