Back to the future as markets hit 2006 levels

January 30, 2015 / By  

Its 30 years since Michael J Fox jumped in the DeLorean and started to travel back in time and eventually forward to the year 2015. So while we are still waiting for hover boards, flying cars and time machines we do have tablet computers, flat screen TV’s, and Skype. Unfortunately they didn’t cover the world of commercial real estate investment in any of the three films (an obvious oversight which probably cost them the Oscar) but it seems as though investment markets have picked up the plot anyway.

Commercial real estate investment volumes in 2014 have gone back in time to match those of 2006 at US$710 billion. But while the numbers look similar the makeup of the market is very different to 2006. While Marty McFly used biofuels to power the car in 2015, real estate markets are using a different type of fuel to power markets along. In 2006 debt and financial instruments were key to transactional volumes pushing above the US$700 billion mark; in 2015 it is equity that is the fuel of choice, with debt in an important supporting role.

Globally 2014 is 20% above 2013 levels with the Americas and EMEA growing by 25%; Asia Pacific was slightly more subdued with volumes increasing by 3%. For 2015 we see even more growth for investment volumes although more within the 5-10% range which means full year 2015 volumes of around US$740 – US$760 billion. If however, European QE has the effect on real estate markets that we witnessed in the US, Japan and the UK when they introduced similar programs then volumes could well move back to the future once again and pass the previous peak of US$758 billion which we recorded in 2007.

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