Real estate transactions slow down worldwide in 2016, says CBRE
Real estate transactions slow down worldwide in 2016, says CBRE
But non-mainstream real estate investments are gaining favour
Commercial property investment activity dropped 19 percent in nearly all major markets in the first quarter of 2016, according to a new CBRE report.
Commercial property transactions fell to USD183 billion in the first quarter, as investors waited to see how equity markets would play out while the stock market showed high volatility from September 2015 to February 2016.
Slowing economic growth in China is also a significant factor, ensuring that the turnover in 2015 was a tough act to follow.
“We expect the volume of capital that flows into real estate in 2016 to be around that of 2014 and 2015,” Richard Barkham, global chief economist at CBRE, stated. “It is safe to suggest that pricing has found a natural floor, but we would not be surprised to see cap rates or yields contract by year’s end.”
More: Another year, another record for Asian outbound investment
CBRE notes that the biggest single driver of total capital flows and real estate flows is GDP growth in the Organisation for Economic Co-operation and Development (OECD) nations. Taking primary roles in the economic slowdown of recent months include: the USD400 billion loss of investments from the oil price slump, the portent of an emerging-market debt default, and the oft-cited UK referendum on European Union membership.
In today’s low-yield environment, CBRE expects to see more attention on alternative real estate investments such as student housing and healthcare, which are gaining favour in European markets.
In 2015, such alternatives accounted for 14 percent of total real estate investment, compared with just 7 percent in 2008.
CBRE also expects more Chinese hunger for transactions in cross-border real estate investment, coming off a year in which outbound investment from Asian countries totalled a record USD62.4 billion. High savings rates, a rapidly growing insurance sector, and healthier domestic markets than usual should ensure capital to keep flowing outward from China.
In its 2016 survey of Asia Pacific Investor Intentions, CBRE noted that 41 percent of Chinese investors indicated they wanted to invest outside Asia-Pacific this year, compared with 39 percent in 2015.
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Source: Property Report