Worldwide capital investment values in commercial real estate (CRE) increased 12% year-over-year in the first quarter, according to new data released by Los Angeles-based CB Richard Ellis (CBRE).
The Asia Pacific region saw the greatest year-over-year increase in the capital value of office properties value, with an 18.9% rise – the largest increase since the second quarter of 2008. Transaction volume in the Asia Pacific, as a whole, rose 5.5% year-over-year to $21.3 billion in first quarter. However, CBRE found a large variation in year-over-year activity across the region, with an increase of 14.9% in Asia but a decrease of 44.8% in the nations along the Pacific Rim.
CBRE noted that the Japanese market is expected to remain vibrant in the face of recent disasters that seriously impacted the nation.
‘While the March 11 Japan earthquake is expected to slow investment activity in the short term,’ CBRE wrote, ‘we have not yet seen either substantial change of investment policies or serious cancellation of ongoing deals. Investor demand for and sentiment toward commercial real estate in the Asia Pacific remains high, with the availability of appropriate property posing the greatest constraint on sales turnover. The bright outlook for the economy and the real estate markets, coupled with a high level of successful capital raisings in Asia, is keeping sales volume high by regional standards.’
CBRE adds that Asia Pacific-based real estate investment trusts were the key purchasing group for CRE in this part of the world, with major sources of capital coming from Singapore, Malaysia, South Korea, Hong Kong, Japan and China.
Across the Pacific, CBRE found CRE investment volumes in the Americas were up 72% year-over-year for the first quarter, marking the fifth consecutive quarter of gains. The U.S. was the dominant market, representing 82% of all activity, although Brazil marked the largest gain, with $2.4 billion in transaction volume during the first quarter – a 350% year-over-year increase that represented 8% of total transactions in the Americas.
CBRE was bullish on the U.S. CRE market's near-term future.
‘The commercial mortgage market in the U.S. is recovering,’ the company stated. ‘CMBS issuance this quarter alone nearly reached the level recorded during the entirety of 2010. Even better, insurance companies and international banks are also eager to expand their commercial mortgage originations in the U.S. Additionally, thanks to low interest rates and loan-to-value ratios that are trending higher, there is no shortage of inexpensive capital in the U.S.’
CBRE also observed that U.S.-based capital is being replaced as the dominant factor in the European CRE market.
‘Whereas in the past, the U.S. has been the source of most of the capital flowing into European real estate, in the last year, there have been much greater flows from Asia, with Canada also providing a significant proportion,’ CBRE reports. ‘The nature of the capital flowing into European real estate has also changed: While the U.S. capital previously mentioned was largely opportunistic investments led by fund managers, the capital now coming from Asia and Canada is sourced directly from institutions such as sovereign wealth funds and pension funds. Such institutional investors are primarily seeking out core properties for diversification purposes rather than return-driven properties previously sought out by many of the U.S. fund managers.’
CBRE's data takes into consideration office capital value trends, development completions, debt-financing availability, global investment volumes, cross-border capital flows and yield spreads. The full data is available online.
