MIPIM: Cushman predicts bumper $1.75 trillion global volumes in 2019

The weakening global economic outlook has perversely prompted a respite for real estate markets this year, as central banks have once again delayed interest rate normalisation, in a move which is expected to prolong the property cycle and deliver volumes in the region of US$1.75 trillion in 2019.

Last year saw a new high watermark for global real estate volumes – up 4% to US$1.75 trillion, surpassing 2017’s previous record tally of US$1.68 trillion – according to new data from global real estate services firm Cushman & Wakefield.

Cushman predicts last year’s record volumes will be maintained in 2019, as investors target a wider range of markets to find opportunity, and more sellers come forward as real estate strategies adjust to evolving monetary policy, geopolitical tensions and structural change.

Pricing is expected to edge ahead, however this will be driven by stable yields and steady rental growth for the best assets rather than yield compression which has typified recent years.

Report author David Hutchings, Cushman & Wakefield’s Head of Investment Strategy EMEA Capital Markets, explains:

The economic environment is weaker than expected just a few months ago but so too is the inflation outlook on a global basis. 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.

“With a stable, contracted income and exposure to growth and inflation, real estate continues to be incredibly attractive and demand remains strong for the right product. However, defining the right product has become ever harder as powerful, market-moving occupier strategies are reshaped by e-commerce, social and business change, low growth and affordability constraints.” 

Cushman’s predictions by region for 2019:

  • US: volumes are forecast to fall 3% from last year’s $549bn to $530.7bn in 2019, a reflection of the regions’ mature position in the property cycle putting upward pressure on yields and follows an exceptional 2018.
  • EMEA: investment volumes are predicted to reach $339.2bn in 2019, a 2.5% increase on 2018’s $331bn, driven by increased demand across a growing range of tier 2 cities and new sectors.
  • Asia-Pacific: investment volumes are forecast to reach $875bn in 2019, a 1% increase on 2018.

Cross border real estate investment has flourished last year, growing 10.7% to $405bn, led by stronger continental flows.

Carlo Barel di Sant’Albano, chief executive of Cushman & Wakefield’s Global Capital Markets & Investor Services, explains:

“International capital flows are becoming yet more dynamic, increasingly cross border and more about balancing quality with quantity – this will be true whether you are referring to stock, yields, talent or living standards.

“An abundance of capital will continue to drive the market and sustain pricing in 2019, but structural forces, such as e-commerce, will be driving areas of outperformance even as the cycle slows. Hence there is a real need to look beyond market averages to see the detail of the local market, the deal, the vendor, the lender and above all, the user.”

You can download the full report, here.

james.wallace@realassetmedia.com