The last three months have seen a return of volatility to capital markets around the world with equity indices, bond and debt markets recording increased volatility in pricing. In commercial property the trends we have been predicting and witnessing over the last three years, with more institutional, private equity and private individual money entering the sector, have continued with global volumes in H1 2013 up 11% compared to the first half of 2012.
Global transactional volumes have again exceeded US$100 billion, for the 5th successive quarter. Ignoring the dip in the first quarter of last year we have now recorded 11 quarters of US$100 billion+ transactional activity. Q2’s numbers are US$114 billion up 4% on this time last year with the first half of 2013 11% higher than a year ago.
The Americas continue to surprise on the upside with Mexico and Canada keeping up with the accelerating volumes in the USA (19%) on a year on year basis. The buoyant market in the USA has been well illustrated by two major deals in NY, the GM office building and 650 Madison Avenue both changed hands for values in excess of US$1 billion.
Elsewhere the recovering European market continues to make slow but steady progress with volumes down just slightly compared to Q2 2012, but the first half of 2013 is 12% ahead of this time last year. It is a similar picture in Asia Pacific where first half volumes are 11% higher than a year ago but where a drop in activity in China has held back the region slightly; Japan and Australia both continue to see growth.
The big news this quarter concerned the prospect of the Federal Reserve and other central banks considering reversing their policy decisions on quantitative easing. This resulted in an immediate rise in 10-year bond rates globally and triggered a rise in the cost of debt for commercial real estate. The move in policy was inevitable and at present we see no major consequences for real estate investment markets, although as we have stated on numerous occasions yields in some markets have compressed to levels which look vulnerable to a further rise in bond yields.
With the first half of 2013 well above this time last year we are maintaining our view that for the full year 2013 volumes will be between US$450-500 billion.
