Global commercial transaction volumes reached an all-time high of $800 billion, increasing 4% year-over-year and making 2019 the most liquid year on record, according to new research from JLL. Outperformance in the U.S. and core markets in Asia are driving growth, led by New York, Japan, China, South Korea and Singapore. But political uncertainties may make investors more cautious going forward.
“As the real estate cycle extends into its tenth year, investors are increasingly favoring locations and sectors that are resilient to economic or geopolitical disruption,” said Richard Bloxam, global CEO of capital markets at JLL. “Cities that offer a diverse range of talent and innovation attract significant investment interest, with the industrial and ‘living’ sectors continuing to perform well in the current global climate.”
Real estate investment volumes are expected to remain elevated throughout 2020 as investors continue to view it as an attractive asset class, but investors are increasingly cautious and are struggling to invest the near-record amount of available capital sitting in funds across the world.
London remains the second-largest destination for cross-border capital targeting real estate, despite political uncertainties. The city experienced a 41% decline in direct commercial real estate investment in 2019, but should rebound following a resolution of Brexit, especially from overseas investors.
Asia Pacific continues to perform well, with investment in the region rising each year since 2015, reaching a peak of $169 billion in 2019. Helped by a more global outlook from foreign investors, Shanghai, Beijing and Singapore have all seen elevated investment in 2019 – over $16 billion across the three cities, according to data analyzed by JLL.
Beyond the gateway cities, high-growth, secondary cities in both mature and transparent markets will continue to present opportunities for investors. Mid-sized cities with innovation credentials, a highly qualified workforce and cost efficiencies are seeing economic growth and increased concentrations of human capital. These innovation geographies are attracting companies and investors are following these enterprise trends, factoring in talent considerations and innovation potential as a means of mitigating risk and spotting future resilience. This will continue to benefit liquidity in leading innovation hubs such as Silicon Valley, Boston and San Francisco. However, this hierarchy is likely to be more fluid as we look beyond 2020 and market dynamics shift.