Global Commercial Property Acquisitions Surpass $1 Trillion in 2007
- Feb 13, 2008
The size of the global commercial real estate market is larger than previously thought, with more than $1 trillion in significant property sales across 75 countries and five continents, according to the new Global Capital Trends report released by Real Capital Analytics. And because RCA only tracks sales greater than $10 million, the total size of the marketplace may be closer to $1.5 trillion, noted RCA founder & president Robert White. RCA is the first independent research firm to report on the global property markets. Of the cities reported, 114 recorded more than $1 billion of commercial property sales, with 48 in North America, 35 in Europe and 21 in Asia. Office was the most active sector, representing $434 billion worth of sales. Nearly 1.2 billion square feet of property changed hands last year, equivalent to all of London, Tokyo and New York City combined, the report said. One of RCA’s largest findings was that commercial property sales volumes in Asia could surpass those in either Europe or the Americas in 2008. As a result of the credit crunch, sales activity has slowed considerably in both North America and Europe, while Asia has been unaffected. And this credit crunch will further entice U.S.-based investors to look overseas. “There are so many opportunities off-shore,” Steve Williams (pictured), RCA’s international property consultant and former president of The Royal Institution of Chartered Surveyors, told CPN today. “Everybody in the U.S. is talking about global allocations this year.” He noted that Asia and Eastern Europe offer some of the biggest opportunities for U.S. investors. Other report findings included: the risk premium for property ranges from 20 to 350 basis points, with the U.S. and Honk Kong as the least risky investment locations; half of all land acquisition last year was located in China, with $50 billion in transactions, double that of the United States; and corporate users capitalized on global investor demand with $88 billion worth of asset sales, with $56 billion of those as sale-leasebacks. As for 2008, Williams said the global marketplace will continue to see a surge in equity. “We won’t see a commercial real estate market crash by any means,” he said. The debt side will continue to see illiquidity for a while, while lenders take a back seat. And there is a battle being played between the central banks and whether they can impact the market as much as sovereign wealth funds, he noted. “We need certain coordination between the G7 and the finance ministries regarding monetary policies.” Williams noted that for the past five years, RCA has been tracking transaction data domestically, “but the market has gone global on us,” he said. “There have been much more cross-border transactions, so 18 months ago, we decided to take on the world. With difference protocols, currency conversions and different ways of looking at real estate, some said it couldn’t be done. But especially with the subprime (crisis), there is an appetite for this information.” The sales tracked in the repport include office, industrial, retail, apartment and hotel properties as well as developable land for them. RCA also noted that the availability and reliability of property sales information varies greatly by country and even within certain countries.