Final quarter surge could mean a new investment record?
November 13, 2015 / By David Green-Morgan
Does it feel like 2007 to anyone else? Well for those of you reading this on your phone, 2007 was when the first iPhone was launched and the start of the smart phone wars; now we get new versions every six months. It was also the year of the final Harry Potter book, the Deathly Hallows, somewhat appropriate given what the end of the year would bring to financial markets.
It was of course the peak of the cycle in commercial transactional volumes with US$760 billion changing hands during the year. The final quarter of 2007 was already reflecting the slowing investment market with volumes over 20% lower than the third quarter of that year. One of the hallmarks of the recovery from the trough of the market which followed has been the final quarter flourish we have recorded over the last five years. And with a similar result in the final quarter of 2015 we could surpass the high point of 2007.
We are at US$500 billion as we enter the final quarter of this year, so we would need an exceptional quarter to beat the record of US$760 billion, but certainly one similarity of the previous peak is being repeated with more bigger deals on the market and a resumption of the portfolio mania being a key feature of activity in 2015.
Although we are only 3% above 2014 levels in USD terms, using fixed exchange rates activity is 15% greater than last year. The swings and roundabouts of the currency markets are even more difficult to predict than commercial property but the overriding momentum of investors within global markets should not be underestimated.
We are now six years into this cycle and our initial thoughts on 2016 are that they will be on a par with 2015’s activity as pushing through these levels of transactional activity will be increasingly difficult, given the wider economic environment of slowing global growth and the fact that emerging markets are not maturing quickly enough to absorb the levels of capital currently available.
The Times best seller list doesn’t provide encouraging reading for 2016 with “You are Dead” and “Hope to Die” in the top two positions. This cycle looks as though it will be different with ultra-low interest rates set to continue in 2016 encouraging capital to look for opportunities in higher yielding assets.
