Another year and another quarter of investment volume growth around the world. Investment markets which have grown consistently over the last four years have started 2014 brightly with 23% growth compared to this time last year.
Much of the growth over the last four years has been associated with a hunt for yield globally, not just within the property sector but across the global capital markets. With government bond yields at historic lows in many countries commercial property has provided an attractive source of risk adjusted investment returns, with many groups investing in the sector for the first time.
However, while investment volumes have continued to improve, occupational fundamentals have struggled post the financial crisis. The structural changes happening in the financial services industry have forced occupiers to consider their longer term space needs, in terms of quality, quantity and location. This has made for a depressed and stagnant leasing environment in many cities. This now seems to be changing with many more cities seeing an improvement in take up fundamentals and a return of rental growth across many of the office markets JLL covers globally. The improvement is not uniform, with many cities still providing plentiful options for occupiers it will be a long process, but we certainly seem to be seeing the first signs that the corner has been turned.
This should give renewed impetus to investment markets, stronger corporate demand coupled with financing markets returning to normality in most countries will provide an additional level of enthusiasm for investors to proceed with purchases. In addition the rise in values is encouraging vendors to place more stock into the market place, particularly in 2014 portfolios and larger lot sizes.
With US$130 billion transacted in the first quarter of 2014, we are confident that we shall see another year of investment growth. At this stage we are estimating US$650 billion for the full year, 10% higher than we recorded in 2013.
About the author
David Green-Morgan is Global Capital Markets Research Director, based in Singapore.