Global real estate investments record best performance in a decade

PETALING JAYA (Jan 22): Overall  global real estate investment volume in 2018 were up 4% from 2017, achieving  the best annual performance in a decade, according to global real estate consultancy JLL’s  research,

However, global investment volumes are expected to fall about  5% to 10% from the US$733 billion (RM3.03 trillion) recorded in 2018, due to a slightly reduced appetite from investors to sell, as well as continued selectivity in acquisitions.

In a press release today, JLL global head of capital markets Richard Bloxam said  in a year when investors have had to deal with increasing populism, protectionism and political uncertainty, the appeal of real estate as an asset class had continued to rise  in 2018.

“Interestingly, investors remain focused on gateway cities, despite tight pricing. Many are looking at alternatives or emerging locations, as well as varying real estate property types within these cities, rather than exploring  less familiar cities,” he said. 

A notable trend is that half of these established gateway cities are in Asia Pacific. “Increased  transparency in these markets is encouraging more investment, moving these cities even higher up the rankings,” he added.

According to JLL’s research,  London maintained its position as the top city for global real estate investment in 2018. The city, together with New York, Paris, Seoul, Hong Kong, Tokyo, Shanghai, Washington DC, Sydney, Singapore, Toronto and Munich, have appeared in the top 30 ranking every year for the past decade and account for 30% of all real estate investments.

Looking at  2019, JLL expects investment activity to be slow, but “only marginally from its current high”.

“Fundamentals in real estate remain compelling, despite historic low yields, as robust corporate occupier fundamentals across most markets are leading to positive returns. As such, investment activity may slow, but only marginally from its current high, as investors look to hold their real estate exposure and become more selective in the search for assets with strong income growth,” it said.

Nevertheless, investment activity momentum will be maintained into 2019, as real estate continues to look attractive in comparison to other asset classes. 

A sharp correction is unlikely as there is still a significant weight of capital looking to invest in real estate and corporate occupier market fundamentals across many markets are positive, according to the firm.

JLL also believes that  institutional real estate sector  will continue to expand, driven by factors such as low volatility, diversification benefits, long-term income and an attractive pricing premium to core sectors.

Meanwhile, asset classes such as student housing, senior living and multi-family have continued to attract more institutional money in 2018 and the momentum is likely to continue in 2019, according to JLL.

“In contrast, the retail sector has seen less activity as investors adjust their investment approach to reflect changing consumer behavior. 

“In gateway cities, the office sector tends to account for a higher proportion of investment volume — 68% in 2018, compared to 51% in global volumes,” it said.