Q1 volumes point to further global transactional growth in 2013
April 10, 2013 / By David Green-Morgan
After such a busy end to 2012, when volumes surpassed US$150 billion for Q4, a drop off in volumes in the first quarter was to be expected. However, the US$94 billion that we have recorded in our preliminary numbers is a healthy 8% higher than the first quarter of 2012 and points to further growth in transactional volumes in 2013, over and above the US$447 we recorded for the full year 2012.
While all three regions saw similar levels of transactional increases, between 7-8%, on this time last year it’s the mentality of investors at the regional and global level that is more interesting as we move into the second quarter of 2013. Confidence can be a fragile commodity, especially when there are so many moving parts as there are in the real estate investment community. Economics, currency movements, corporate profitability, tenant demand – all play a part in the decision making of investors both domestically and cross-border.
A year ago the threat of war on the Korean peninsula and a tax on savers within one of the Eurozone countries would have brought markets to their knees and investors scurrying for the safety of gold and US treasuries. Despite the amount of media coverage, the Cyprus banking crisis has been resolved, although the long term ramifications for this small economy look to be serious. And what we have discovered about North Korea is that they have a small but growing tech hub which is pretty good at doctoring photographs. What these two situations have emphasised is that while the global economy has many challenges to overcome, some of which will take a considerable amount of time to resolve, there is a sense of buoyancy in the direction being taken by political and business leaders and a confidence that the new people in post know what they are doing and are taking the right, if sometimes difficult decisions.
What this means for real estate is that investors are starting to look slightly higher up the risk curve and that is borne out by the increased transactional volumes compared to a year ago. Although there is still huge demand for well let buildings in core locations, demand is also increasing for slightly off pitch properties with maybe a higher than average level of vacancy where good asset management can turn the asset around. Also, as we have seen from the US over the last few quarter’s secondary cities are seeing a growing share of investment activity.
For transactional volumes to surpass the US$500 billion level for 2013 we will need to see increasing levels of secondary market activity as core markets alone will not be able to sustain the year on year growth we have seen since 2009.
