In spite of warnings about late cycles and rising interest rates, 2018 was a record year for real estate investment, and 2019 is likely to match it, according to Cushman & Wakefield.
Last year, $1.75 trillion was invested globally, a 4% rise on 2017, Cushman said in a report released at the Mipim property conference in Cannes, France.
It expects that level to be maintained as investors target a wider range of markets to find opportunity, and as sellers worried about rising rates and political tensions come forward to sell in a market where there are still plenty of buyers.
“The economic environment is weaker than expected just a few months ago but so too is the inflation outlook on a global basis,” Cushman & Wakefield Head of Investment Strategy EMEA Capital Markets David Hutchings said. “As a result, while risk is up, the day of reckoning on interest rates for corporates and investors has again been delayed. The coming year is therefore set to see a further extension of the property cycle, offering investors another chance to get their portfolio into shape ahead of a period of slower growth.”
Cushman said pricing is expected to edge upward, but this will be driven by stable yields and steady rental growth for the best assets rather than the yield compression which has typified recent years.
The rise in investment volumes in 2018 was to a large degree down to North America, where transaction levels rose 16% to $549B, partly due to tax cuts. Cushman said it expects global volumes to fall slightly to $531B this year.
European volumes fell 11% to $331B, but Cushman expects them to rise 2% this year. Asia was the biggest overall market in 2018, at $866B, a figure Cushman predicts will grow 1% in 2019.
In contrast to wider nationalist trends, cross-border real estate investment flourished in 2018, growing 11% to $405B. And in spite of the uncertainty created by Brexit, Cushman said the UK was the second most attractive destination for international investors, with more than $30B of capital targeting the country. The U.S. was the most popular, with almost $100B targeting it.
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