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In 2019, global commercial property investment will remain flat.

Due to less ultra-large sales, Brexit, and trade policy uncertainty, the economy has slowed. in qatar

According to a new report from CBRE, global commercial real estate investment volume, including entity-level transactions, increased 7% quarter over quarter in Q3 2019, but dropped 2% year over year.

Volume was down 5% year-to-date compared to the same time last year. On a regional level, APAC posted a strong 49 percent year-over-year rise in Q3, which helped to offset sluggishness in H1 and boost year-to-date growth to 6%. Due to political instability, low yields, and recession worries, the Americas and EMEA had a relatively weak third quarter.

CBRE's Global Chief Economist and Head of Americas Research, Richard Barkham, says, "CBRE predicts a single-digit percentage point fall in global commercial real estate investment this year, compared to last year's record high. Lower interest rates, tight labor markets, and cautious consumers have kept a significant slowdown at bay, despite uncertainty about Brexit and numerous trade conflicts. Unless market sentiment improves, the pattern of fewer mega-deals will likely continue into 2020."

 

The following are some of the report's highlights:

In Q3 2019, global commercial real estate (CRE) investment, including entity-level transactions, totaled US$260 billion, up 7% from the previous quarter but down 2% from Q3 2018.

The amount of investment in the third quarter was seasonally adjusted to match the previous quarter, but it was down 8% year over year.

After adjusting for seasonality, entity-level sales, and Blackstone's acquisition of GLP's U.S. logistics portfolio, U.S. investment volume was marginally down year-over-year in Q3, but is mildly up year-to-date.

Although investor sentiment in EMEA continued to be dampened by Brexit uncertainty, APAC saw a pleasant turnaround in investment activity. Nonetheless, investment volume increased in EMEA after a slow start to the year, with France, Sweden, and Germany leading the way.

Yield spreads have widened as a result of recent interest rate cuts, rekindling investor interest.

For the first time in history, Paris has surpassed London as the most popular destination for international capital. In Q3, the global percentage of cross-border investment fell to a six-year low.

Since third quarters are historically solid, seasonal adjustment paints a slightly bleaker picture. In Q3 2019, seasonally adjusted global volume was flat compared to the previous quarter, but it was down 8% year over year. The scarcity of high-quality assets for sale stifled capital deployment, while fewer ultra-large transactions exacerbated year-over-year declines.

 

Adjusted for season Investment volume in the Americas fell 17% year over year and 3% year to date, owing primarily to lower volumes in Canada and the United States. The United States' investment volume (seasonally adjusted) dropped 7% year over year and 1% year to date, accounting for more than half of global operation. However, except a single transaction--$18.7 Blackstone's billion purchase of GLP's U.S. industrial portfolio—the US would have only seen a 2% year-over-year decrease and a 3% year-to-date rise (seasonally adjusted). In Q3 2019, the decrease in investment volume in the United States was almost entirely attributed to less entity-level transactions. After seasonal adjustment, US investment volume increased by 14% year over year and 8% year to date, excluding entity-level transactions.

In Q3, the global percentage of cross-border investment fell to a six-year low. This was due to a lack of large-ticket retail REIT acquisitions and fewer ultra-large transactions. In addition to capital controls in China, Asian investors who were major cross-border players turned to more domestic and intra-regional investment while the value of retail REITs partially recovered and made them more expensive.

The slump was particularly noticeable in the United States, where cross-border investment has dropped by 57% year-to-date compared to the same time last year (Figure 3). The sharp drop in entity-level transactions accounted for 75% of the drop, while lower inbound investment from Singapore, Japan, China, and Hong Kong accounted for 15% of the drop.

In the third quarter, EMEA investment volume dropped by 6% year on year (seasonally adjusted). Investment activity slowed in the United Kingdom (-28 percent) and Spain (-44 percent), but grew strongly in France (44 percent) and Sweden (307 percent). For the first time in history, Paris has surpassed London as the top destination for international capital. Germany's investment rebounded strongly in the third quarter, leveling off with the same timeframe the previous year. Year-to-date, EMEA investment volume has decreased by 14% (seasonally adjusted), with the United Kingdom and Germany accounting for 61% and 20%, respectively. The drop in investment, as in the Americas, was due to a lack of quality product and fewer mega-deals, especially in the top five European markets.

The most appealing investment assets in EMEA remained office and residential properties. Investors focused on income growth, capitalizing on steady leasing activity and rent growth, but the residential sector was weighed down by confusion over the EU's rent control policies. Despite enough liquidity and reasonably high yields, investors in the United Kingdom have been cautious due to Brexit uncertainty. We remain hopeful about a smooth Brexit, which will help to reenergize the economy.

The amount of money invested in APAC increased by 49 percent year over year, or 42 percent after seasonal adjustments. The rise can be attributed in part to a low base impact, as 2018 saw the lowest Q3 investment level since 2013, owing to the escalation of the US-China trade war. This is particularly true in China, where year-over-year growth was 68 percent in the third quarter (seasonally adjusted). Lower interest rates boosted investor sentiment in Australia (42%), Japan (31%), and Singapore (62%), resulting in more competitive yield spreads and an overall increase in big-ticket transactions. Since 2005, Australia has had the largest quarterly office investment rate. Due to social turmoil, Hong Kong (-9% ) continued to see a drop in investment volume. Year-to-date, APAC's total of US$92 billion was up 6% (seasonally adjusted) from the same timeframe the previous year.

For global investors, Asia continues to offer comparatively high yields and income growth opportunities. Just 8% of Asia's investment came from outside the region in the first three quarters of 2018. This has risen to 13% in the first three quarters of 2019, owing largely to capital inflows from the United States, Canada, and Germany.

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