Ceilings & cliffs drive investment volumes above $400 billion for 2012
January 9, 2013 / By David Green-Morgan
The prospect of higher capital gains taxes on commercial property transactions in the US in 2013 combined with strong final quarters in Asia Pacific and Europe propelled global volumes above our forecast of circa $400 billion for 2012. Our preliminary numbers are at $156 billion for the final quarter of 2012, resulting in full year volumes of $451 billion. This is a 4% rise on 2011 and higher than what we predicted at the start of the year. For 2013 we are expecting global volumes to be between $450-500 billion as commercial property continues to benefit from investors looking for secure income streams with modest capital growth over the medium to long term.
Although we all expected the fiscal cliff negotiations in the US to be resolved, many vendors didn’t want to take the risk and unloaded properties before the Jan 1st deadline. In the end the negotiations were resolved but without too many of the major issues being addressed. As a result final quarter volumes in the US were 90% higher than in the third quarter and 70% up on Q4 2011. This level of activity is consistent with the peak of the market in 2007 so is unlikely to be sustained given the current economic environment through 2013. AP also had an above average final quarter to bring full year preliminary volumes over $90 billion to end the year only slightly below the $98 billion recorded in 2011. Europe had its traditionally busy end to the year up 65% over Q3 and 18% higher than Q4 2011. However there has been a shift away from investment in the UK to a more pan –European approach with France, Germany and the Nordics witnessing a strong end to the year.
The prospects for 2013 look to be as interesting and dynamic as 2012. With economic growth forecasts not showing much growth over 2012 we are expecting commercial investment volumes to be fairly similar and to trade within a narrow range of between $450-500 billion for the full year. European volumes will continue to remain under pressure as the region teeters with recession, for the first half of the year at least. Asia Pacific is expected to show some growth with opportunities being presented through the increasing transparency and development pipeline in the region. The Americas has the potential to provide some significant upside if the early year political issues can be resolved and policy makers provide guidance and stability to the recovering job market. Although commercial property has consistently recovered from the lows of 2009, prices are still 20% below their peak according to the IPD global index although much of this price correction is to be found in secondary assets. However, we expect investors to continue to look at these opportunities in greater detail as pricing in prime, core cities and sectors looks vulnerable to a change in pricing in government bond markets.
