investor in China to date, according to
JLL—but also because it so aptly illustrates
the robust appetite that global asset managers and investors continue to have for
real estate around the world, outside of
the US.
This year Asia has become an increasingly popular CRE investment destination
among investors from the Americas and the
rest of the world; indeed CBRE reports that
CRE investment by Westerners in China
and Singapore grew by 329% and 71%,
respectively, for the first half of this year,
compared with the same time period in
2018, exceeding $3.7 billion.
Another reason why the Brookfield deal
stands out: it adds nuance to the narrative
that global CRE deals have started to fall,
and strictly speaking, they have. For the first
half of the year, year-on-year sales transac-
tion activity dipped by 9%, JLL reports,
“representing a level of softening in line
with expectations,” it said. Another JLL stat
to note: Q2 2019 saw the four-quarter roll-
ing average of total global cross-border
activity hit its lowest point since Q2 2017.
The nuance is this: Investor sentiment
remains strong, as the Brookfield deal illustrates, and dry powder is accumulating at a
rapid clip with fundraising by private
closed-end real estate funds reaching its
highest first-half level at $80.3 billion. Dry
powder now stands at a record $331 billion,
JLL said, and funds closing in H1 2019 were
oversubscribed by an average of $167 million or 7% more than initially targeted. The
issue for many, if not most, of these funds is
the difficulty in sourcing product that
meets their investment criteria.
As quality deals become scarcer, investors and asset managers are seeking out
new markets, often going beyond the US to
find yield. As it happened, Paris was the
largest recipient of foreign capital during
the first half of the year, according to JLL,
following a flood of cross-border money
entering the city during the second quarter.
Specifically, JLL notes that activity was heavily concentrated in the office sector as
European and South Korean groups targeted assets in the city’s CBD and La
Défense submarkets.
There have been additional changes in
this year’s cross-border flows. China’s outbound investment diminished in part due
to increased regulator pressures while
South Korea’s investment outflows elevated
as groups increasingly pursue assets in
Continental Europe.
Government policy can be a big issue for
Asian investors, says CBRE’s global chief
economist Richard Barkham. China is a
prime example, he says.
“We also see the reverse,” Barkham con-
tinues. “A lot of investors in Asian countries
are doing more overseas investment due to
various shifts in government policy, such as
Taiwan and South Korea. There is also still
quite a pool of capital in Asia seeking to
invest in other parts of Asia.”
Despite the activity in the Asia Pacific
and Europe, JLL expects that global invest-
ment in CRE will decrease about 5% to
10% this year to reach $730 billion. The
weak spots, it said, will be the EMEA region
and a slowing momentum in the Americas.
Barkham is a bit more sanguine about
the remainder of the year. “With some
slight improvement in the US economy and
central banks cutting interest rates, pros-
pects for the remainder of the year are
good,” he says. “A continued buoyant US
market, coupled with restored fiscal expan-
sion and monetary easing around the
world, potentially supports a stronger sec-
ond half of global investment activity.”
CBRE has its own set of numbers to mea-
sure global CRE’s investment performance
for the first half of the year and while they
differ somewhat from JLL’s numbers, they
too point to a downward trajectory in invest-
ment sales. CBRE found that global invest-
ment volume totaled $428 billion in the first
half of 2019, down by 10.6% from the first
half of 2018. Q2 volume increased from Q1
across all regions but overall fell by 7.5%
year-over-year, including entity-level deals.
Only the Americas region reported year-
over-year growth (0.7% to $128 billion).
According to CBRE, Transaction volume
did drop in the Americas, though, for the
first half of the year: totaling $235 billion,
down 5% from the first half of 2018. As for
the rest of the world, activity was down from
last year by 17% in EMEA and 14% in
APAC.
EMEA investment volume totaled $74
billion in Q2, according to CBRE, with
transactions falling in the UK (-50%),
Netherlands (-35%) and Germany (-36%)
but increasing in the smaller markets of
Italy, Poland and Belgium. In the first half
of the year, EMEA investment volume
totaled $136 billion, down by 19% from the
same time period 2018. Approximately
65% of EMEA’s reduced volume took place
in the UK and Germany. France maintained the same investment volume as it did
in the first half of 2018, CBRE said.
The carnage was less pronounced in the
APAC region, where investment volume
totaled $29 billion in Q2. The region’s H1
total of $57 billion was down by 10.5% from
H1 2018. Despite this slowdown, CBRE
