Global Investment Report

Global transaction volumes for commercial property* amounted to US$224bn in the first half of 2013, up 11.7% on the same period in 2012. Much of the increase can be attributed to a faster recovery in the US market.

For Europe meanwhile, volumes reached ?74bn in the first half of 2013 – a year-on-year rise of 7% - delivered in part through improved activity in Spain and Italy.

In the first half of this year, Asia Pacific saw a year-on-year rise of 6% in commercial transaction volumes to US$56.9bn, although this figure excludes Chinese land deals which continue to account for the bulk of activity in the region.

Joseph Morris, Head of Capital Markets at Knight Frank UAE said: “Whilst we have certainly seen a marked increase in demand for investment opportunities in the UAE and particularly Dubai, the main appetite continues to be for the international markets. This is driven not only by a lack of credible investment product in the regional markets but also a need for genuine diversification, wealth preservation and a continued search for income.

“In the main international demand from the Gulf is still focused on key hubs, such as London and New York, though as prices continue to rise many investors are starting to spread their searches wider into different locations such as second tier cities and alternative real estate investment sectors, such as logistics and social infrastructure opportunities, where it is possible to generate an attractive income return in areas that are starting to see strong capital value appreciation prospects.”

Knight Frank forecast another strong year for commercial property around the world in 2014, with capital values for prime offices in most of the world’s major commercial hubs expected to see growth over the next twelve months.

In gateway cities and robust economies there is evidence of increasing investor appetite for riskier assets and markets. Moreover, specific second tier cities such as Atlanta, Dublin and Edinburgh are now receiving greater attention.

According to the Knight Frank research, a number of Sovereign Wealth Funds – from China, Malaysia and Kuwait – remain focused on gateway locations, while the South Koreans and Qataris are now starting to explore opportunities in second tier cities as well as established hubs.

US investors meanwhile are more established cross-border investors and have been looking further afield. REITs are also playing a more significant role in market activity, most notably in the US, South Africa, Mexico, Canada and Japan. “Whilst the spectre of rising interest rates continues to sit on the horizon, a stronger occupational market and improving prospects for rental growth will help to allay certain elements of this inevitable challenge” explained Morris.

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