Global investment into European, Middle Eastern and African real estate fell by 22% in 2018 owing to a mix of political uncertainty, high valuations and a shortage of investable stock.
However, total global real estate investment volumes rose by 4% in 2018 to hit $1.75tn (£1.56tn), a new record that surpasses the previous high of $1.68tn in 2018, according to Cushman & Wakefield’s Global Investment Atlas 2019 report.
EMEA deals accounted for $331bn in 2018, down by 11% on last year. Volumes fell due to a retreat from both global and domestic sources. Global investment into the EMEA region fell by 22% to $88bn as domestic investment dropped by 11% to $160m.
In Europe, retail investment fell for the third consecutive year, by $56bn, while industrial and office deals fell by 24.7% and 9.7% respectively.
In contrast, North America saw investment volumes jump by 17% to $546bn and Asia Pacific investment volumes rose by 4% to $866bn.
C&W forecasts global investment will remain around $1.75tn in 2019, as investors target a wider range of markets, and more sellers emerge amid evolving monetary policy and geopolitical tensions.
EMEA investment volumes in 2019 are predicted to reach $339.2bn, a 2.5% increase on 2018, driven by increased demand across a growing range of tier-two cities and new sectors.
The fall in 2018 was also driven by the sale of large portfolios in 2017, including Blackstone’s European logistics business Logicor for more than €12bn to China Investment Corporation.
Report author David Hutchings, C&W’s head of investment strategy EMEA capital markets, says: “The economic environment is weaker than expected just a few months ago, but so too is the inflation outlook on a global basis. As a result, while risk is up, the day of reckoning on interest rates for corporates and investors has again been delayed.
“The coming year is therefore set to see a further extension of the property cycle, offering investors another chance to get their portfolio into shape ahead of a period of slower growth.”
However, he adds that real estate investment strategies have become more challenging as occupiers are impacted by “e-commerce, social and business change, low growth and affordability constraints”.
Investors target European cities
Cross-border real estate investment rose by 10.7% to $405bn in 2018, bolstered by stronger continental flows.
Despite the fall in overall EMEA investment volumes, demand for European real estate in particular remains strong.
While the US was the top target for global commercial real estate investment ($45bn), Europe has retained its historical position as the most sought-after destination for international capital, with the most cities among the top 10 cross-border investment targets and attracting 53% ($88bn) of global investment.
Six European countries feature in the top 10 after the US: the UK in second slot, followed by Germany in third, France in fourth, Spain in fifth, the Netherlands in sixth and Poland in 10th place.
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