- North America's invested stock grew by 3% returning to growth for the first time since 2007. Global stock set a new USD12.9tn record, up 4% on a year ago. Asia Pacific was the key driver - up by 9%.
- Return to growth was triggered by public and private debt, after banks were forced to deleverage and deal with legacy debt before becoming pro-active again.
- North American volumes set a new post-crisis record in 2013 to USD 235bn, up 19%. This was mostly driven by domestic investors, with cross border investors focused on five gateway markets.
- North America has the highest liquidity ratio of any region globally. Also, U.S. gateway markets like San Francisco, Los Angeles and Chicago rank among the most liquid global office markets.
CHICAGO, June 12, 2014 (GLOBE NEWSWIRE) -- The value of commercial real estate stock held by investors reached a new record of USD12.9tn in 2013 according to the 40th edition of the Money into Property report released by DTZ today. (The full report can be accessed by clicking http://www.dtz.com/research and logging into the DTZ website).
Growth was seen in all three regions. But, it was led by 9% growth in Asia Pacific taking its stock to USD4.6tn, surpassing Europe where growth was a more modest 2% to USD4.4tn. North America returned to growth for the first time since onset of the global financial crisis registering a 3% increase to USD3.9tn. Both the U.S. and Canada posted 3% growth in 2013. But, Mexico did show a small 1% decline over the year.
John Wickes, Head of Americas Research at DTZ, said: "Invested stock in North America returned to growth backed by increases in all four quadrants, for the first time since the global financial crisis. This was due to both the public and private debt quadrants posting positive growth. It seems that markets have finally returned to normality after a four year pause. The delay in debt returning was due to banks needing to deleverage and resolve legacy debt issues before becoming pro-active again in 2013. Due to stronger growth in equity, North American debt as a percentage of total stock reduced to 65% during 2013 from 66% the year before. Despite this decline, it remains the highest leveraged region globally."
Sentiment in the market continues to improve. Over the past year we have seen a significant shift. In particular an improvement in the lending markets, which matches investors' risk appetites. The biggest change is lenders' expectation for a recovery in lending markets. More than 40% expect a substantial recovery this year. This compares to less than 20% in previous years.
Kasia Sielewicz, Investor Research Manager at DTZ and co-author of the report, adds: "Global commercial real estate investment volumes grew 22% to USD 518bn in 2013, driven by a post crisis 23% record share of cross border investment. North American volumes were up 18% in 2013 to USD 240bn, setting a new post-crisis record. Compared to other regions, domestic investors are more dominate in the U.S. than anywhere else. Cross border investors represent a 10% share of total 2013 U.S. volumes. However, key U.S. gateway markets including Manhattan, Chicago, Los Angeles, San Francisco and Washington D.C. have up to three times the national average of non-U.S. investor activity."
These upward trends in stock and volumes are confirmed also by the newly launched DTZ transaction-based indices ("TBI"). The three main TBI sub-indices show that prices increased across all regions over 2013, continuing its recovery from recent years. After recently launching our European TBI, we have now added a separate and new Asia Pacific sub-index TBI to our analysis. Each TBI sub-index tracks the actual change in commercial property prices based on repeated sales. The TBI is a leading indicator of price movements when compared to the traditional valuation-based indices. The latest data on the European TBI sub-index shows a pause in upward movement. But, the latest Asia Pacific TBI sub-index shows a decline over the past two quarters. However, given that the results were based on below average sample size for the period, it might be too early to arrive at any firm conclusions yet.
Hans Vrensen, Global Head of Research at DTZ, said: "Liquidity continues to improve across global markets. As international investors seek to implement their strategies across markets, the ability to source transactions in local markets is essential. This is reflected in each market's liquidity ratio. The global average liquidity ratio rose to 4% in 2013. North America has the highest liquidity ratio of any region globally and posted the strongest recovery at 6%. All regions are now at or above their long run average levels. Liquidity is paramount for investors and Europe stands out as the most liquid for inter-regional investment. Globally, the U.S. does score well with San Francisco, Los Angeles and Chicago standing out as being among the most liquid office markets."
About DTZ
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UGL Limited (ASX:UGL) is a global diversified services company delivering critical assets and essential services that sustain and enhance the environment in which we live. UGL comprises two business units - DTZ and Engineering - which provide whole of life cycle solutions to clients across the property, power, water, rail, resources, transport & technology systems and defence sectors. Headquartered in Sydney, Australia, UGL operates worldwide across 52 countries employing 52,000 people, including 23,000 subcontractors.