Global Commercial Property Investment Reached $800 Billion in 2019
Paris emerged as the most liquid real estate market in the world
Global property consultant JLL is reporting this week that worldwide commercial real estate investment volumes increased by 10% in the fourth quarter of 2019, to $245 billion. This brought full-year activity to $800 billion, up 4% from the elevated levels seen in 2018, making 2019 the strongest year for commercial real estate investment on record.
Established markets drive growth across all three regions
In the Americas, regional activity increased by 15%, to $97 billion, during the fourth quarter. This, combined with the outperformance seen in Q3, boosted full-year volumes by 12%, to $347 billion. Driving regional performance is the U.S., where full-year volumes were underpinned by unwavering investor demand for industrial assets and continued resilience in the office sector. In Canada, annual sales activity is up by 9%, due
mainly to concentrated activity in core office markets such as Toronto, Montreal and Vancouver. In Latin America, Mexico and Brazil each saw double-digit growth in 2019 due to large-scale industrial transactions in both markets.
The fourth quarter saw a reversal in EMEA as sales volumes jumped up by 11%, to $93 billion, compared to Q4 2018. This took full-year volumes to $284 billion, 5% lower than the levels seen in 2018. Germany saw record investment in 2019, with volumes rising by 1%, making it the most liquid market in the region. Similarly, France witnessed a 15% increase in transaction activity, with 2019 representing a new high-water mark for the
market. Many of the region's other major markets also performed well in 2019 with Spain, Sweden, Italy, Norway, Ireland and Switzerland all experiencing heightened activity. On the other hand, activity in the UK continued to be hampered by Brexit related uncertainty, but 2020 is expected to bring about a rebound in market conditions as outcomes become more clear.
Despite a relatively slow fourth quarter in Asia Pacific, the superlative start to the year meant that full-year volumes were up by 6%, to $169 billion. The increase in trading was supported by core markets, such as China, Japan, Singapore and South Korea, where domestic and foreign investors alike remain active.
Meanwhile, political uncertainty continues to adversely affect Hong Kong where fully-year investment fell by 53%.
Solid industrial performance draws foreign capital to the U.S.
Global industrial investment increased by 24% in 2019, rising to $166 billion. As bidder-pools strengthen further and competition for product rises, investors are increasingly looking outside of their home markets for product, with cross-border acquisitions in the sector rising to a new high of $53.6 billion.
The biggest recipient of foreign investment in the industrial sector continued to be the U.S., which received 47% of all cross-border capital flows into the sector in 2019. Cross-border investors such as global funds, as well as groups from Canada and the Middle East, have flocked to the U.S. market due to the relative availability of scale. Solid fundamentals have also attracted investors as robust absorption has largely offset an
increase in new deliveries, producing the strongest rent growth the sector has seen in three years.
Elevated activity in the office sector drives growth in Paris
For the first time on record, Paris has emerged as the most liquid real estate market in the world over a full year. Investment in 2019 totaled $30.0 billion, a 7% increase from 2018. Continuing the trend seen throughout the year, investment in Paris was heavily concentrated in the office sector. Office sales grew by 6% and rose to $24.8 billion, the highest level since 2007 and represented 83% of all investment in the Paris market. Transactions of scale contributed meaningfully to this growth, with eight acquisitions over $500 million.