A record $1.34 trillion of property will change hands this year as new capital, investor appetite and geopolitical unrest drives investment

Kasmira Jefford
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The difference between volumes and value of transactions has been put down to the strength of the dollar (Source: Getty)

A record $1.34 trillion of global real estate is expected to change hands this year, as new sources of capital and investor appetite combined with geopolitical unrest and increased uncertainty drives further investment into the sector.

Cushman & Wakefield’s Atlas Outlook Report, presented this morning at the annual MIPIM property conference in Cannes, shows that global property trading activity fell last year for the first time in six years, down two per cent to $1.29tn.

The property advisory group said the decline was largely due to the strength of the dollar, diluting volume growth measured in other currencies. So while global investment volumes fell two per cent in dollar terms, in euros there was a gain of 17 per cent.

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A slowdown in demand for development land in Asia also hit trading volumes which, when excluded, meant the amount of real estate that changed hands actually rose by eight per cent, led by residential, hospitality and logistics.

The report predicts that property trading activity will bounce back to reach a new record high this year thanks to a strong supply of debt in the market and “unsatisfied demand” for real estate - with volumes rising by four per cent.

Carlo Barel di Sant’Albano, chief executive of C&W global capital markets & investor services, said that geopolitical issues, the length of the recovery cycle, market volatility was dividing opinion as to how best to invest.

However he said this was also benefiting the property market and boosting demand for asset.

“In this economic environment there is also an increasing number of willing sellers aiming to crystallise returns. We therefore forecast a four per cent increase in trading this year, which could easily be bettered if current global volatility levels stabilise or decline,” he said.

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In Europe, volumes are expected to rise between five and 10 per cent and yields to fall by 30 basis points, as the low cost of capital and further quantitative easing drives further activity.

Barel di Sant’Albano continued:

Performance is yet to peak, with yields not yet at their floor and a slow improvement in occupational demand pushing rents slowly ahead. The short-term cycle favours offices, with growth in prime rents of four to five per cent forecast across major US gateway cities such as New York, San Francisco, Los Angeles and Boston. Elsewhere, similar gains are expected in London, Dublin, Stockholm, Madrid, Sydney, Shanghai and Tokyo.”