Taking account of last year’s strong appreciation of the U.S. dollar, global investment volume grew by a greater 5.9% YTD. The U.S. market, accounting for more than half of the global transactions, registered a 17% year-over-year increase in Q3 and significantly boosted the overall growth.
The surge in the American investment activity was enhanced by substantial entity transactions such as Brookfield’s US$15 billion takeover of GGP and Prologis’ US$8.5 billion acquisition of DCT Industrial Trust. Excluding entity transactions, Americas investment volume increased 2.3% in Q3 and 2.8% YTD. The hotel and multifamily sectors registered 23% and 14% YTD growth, respectively. Office sales rebounded after a relatively soft H1 and increased 13% in Q3. The levels of industrial and retail property sales decreased year-over-year but were more than offset by the surge in mergers and acquisitions.
Cross-border investment into the U.S. market exceeded US$28 billion (including entity transactions) or 18% of the total investment in Q3, the second-largest quarter for capital inflow behind Q4 2015. Investment originating from Canada and Singapore made up 80% of the total inbound activity. Year-to-date, capital inflows from Singapore, Switzerland and Germany grew 35%, 53% and 13%, respectively, on already large investment bases. Most of these investments were direct property purchases, in which EMEA investors continued to exhibit a strong appetite for office properties while APAC investors shifted toward industrial assets. Chinese capital inflow decreased by 14% YTD, or 5% if combined with capital from Hong Kong. As interest rates continue to rise, more international capital should flow into the U.S. Tier II and III markets in pursuit of higher yields.
APAC investment volume fell by a total of 29% year-over-year in Q3 relative to a strong Q3 2017. Korea was the bright spot with 29% year-over-year growth, thanks to large-ticket trophy office transactions. Year-to-date, total investment has decreased by 9.7% in the region, but New Zealand, Taiwan and Hong Kong have posted solid growth due to strong office investments. In many other markets, especially China, investor sentiment was somewhat affected by rising trade tensions and stock market volatility. However, a rising trend of logistics mergers and acquisitions boosted industrial property investment in China. Retail property sales fared well in China and Taiwan, where consumer spending kept growing. Looking forward, an unfavourable lending environment, including higher mortgage rates, remains a downside risk in the APAC region. Investors fearing the volatility of the stock market may transfer more into real estate.
Investment in European real estate grew 1.5% YTD following a record year in 2017. Q3 European investment volume totalled US$80.5 billion; the YTD volume growth was largely driven by strong activity in Germany, France and Spain. Germany continued to experience robust growth in 2018, with an increase of 12% YTD compared to 2017, and investment volume of US$22.7 billion. This has been largely driven by a strong residential market and office sales in the top-five German cities. While growth in France eased in Q3, investment volume in the first three quarters is at the highest level since 2007. Uncertainty remains in the U.K., where investment volume slightly fell by 4% YTD, while primary markets such as London have been very resilient to geopolitical risks and continued to attract capital from around the world.
”The Hungarian CRE investment market is experiencing another year of robust turnover, with the first three quarters stacking up an investment volume of EUR 1.1 billion. Several large transactions closed during Q3 2018 produced the second highest quarterly period on record, only marginally exceeded in late 2007. Two major retail centres (Mammut and Premier Outlet Center) were acquired by foreign equity sources with the support of CBRE in 2018; further underpinning the presence of strong foreign capital sources with appetite to do more in 2019. In light of the current deal pipeline, the Hungarian market is well on its way to round up its third highest annual investment volume on record, with EUR 1.7 billion within sight. This comes after two years of already unprecedented combined liquidity”, Gábor Borbély MRICS, Head of Business Development and Research at CBRE Hungary said.