Ever increasing equity allocations brings US$700 billion into view
July 11, 2014 / By David Green-Morgan
Does anybody else feel like we are in 2006 again? It’s a world cup year, Germany performs well, England’s players are already on the beach, a player has left the tournament in disgrace (Suarez in 2014, Zidane in 2006) and the global property markets are alive with investment activity.
For Q2 2014 preliminary global investment volumes are at US$158 billion, which is almost 30% higher than the second quarter of 2013. Over the first half of the year investment activity is 27% higher than H1 2013 at US$294 billion. Europe and the Americas are leading the surge in transactional activity with 43% and 34% growth respectively, with Asia Pacific looking to be on track to match last year’s volumes. A notable feature of the markets in 2014 is the broadening of investors focus, the large markets like the US, UK, Germany, France, Japan, China and Australia are seeing increasing levels of investor interest but so are the smaller markets such as Mexico, Brazil, Southern and Eastern Europe, Thailand, Malaysia and South Korea. Within these countries secondary cities are also competing successfully with the core cities for investor capital; but with more capital to go around everyone is benefiting.
So back to 2006 when transactional activity reached US$700 billion, driven by easy debt and imaginative capital structures. This time is different; in 2014 we have a wall of equity targeting direct commercial real estate with a significant increase in the number of new investors into the sector and an equally large increase in allocations from the long term traditional property investors. While the sources and structure of the capital is different the result is similar, in 2014 we estimate that global investment volumes could once again reach and surpass US$700 billion; and a European team to win the world cup?
