The inexorable demand for direct commercial real estate remains unabated as we head into the final few months of 2014. North America and Europe continue to set the pace while the slowdown in China means that Asia Pacific is likely to underperform the other regions in 2014.
Q3 2014 volumes have risen by 13% compared to this time last year, to US$165 billion. All three regions are higher than last year but the Americas remain the standout performer with volumes 23% higher. On a year to date basis global volumes are even more buoyant at US$463 billion which is 23% higher than the first three quarters of 2013. The US$463 billion recorded at the end of 2013 is exactly the same amount as we recorded for the whole of 2012, a good demonstration of how quickly investment volumes and sentiment has continued to improve.
The divergence in regional performance that we started to see earlier in the year has continued with Asia Pacific lagging behind its 2013 transactional volumes. Much of the slowdown can be attributed to the lack of transactional activity in China where Q3 2014 volumes are less than half of what they were a year ago and volumes are a third lower on a year to date basis. The environment in the other two large markets of Australia and Japan is more positive with year to date volumes in both markets higher than in 2013.
Strongest growth in 2014 has been in the Americas, where the surging US market has been supported during the year by strong investor interest in Mexico and Brazil. The US passed the US$70 billion mark this quarter for only the second time since 2007 as transactional volumes across a range of prime and secondary cities climbed higher.
A similar story is playing out in Europe where the peripheral markets of Southern Europe, The Nordics, Benelux and Central and Eastern Europe are all higher and lending substantial support to the big core markets of France, Germany and the United Kingdom who continue to grow. Although European volumes are only 7% higher than this time last year they remain on track to be over 25% higher than 2013 by the end of the year.
With the positive sentiment around real estate improving we are maintaining our full year forecasts of US$700 billion for the full year. There are slight headwinds to this forecast with a resurgent US dollar meaning more deals will need to be done in Japan and the Euro Zone. Also, the final quarter of the year is traditionally the busiest, but with the number of deals looking to be executed it is possible that some may slip into the first quarter of 2015. However, we do expect the final quarter of this year to surpass Q4 2013 by some margin.
About the author
David Green-Morgan is Global Capital Markets Research Director in JLL, based in Singapore.