Global MarketFlash CRE Investment Q4 2016
The total value of commercial real estate (CRE) investment transactions in both the APAC and EMEA regions increased sharply in Q4 2016, in both cases to new record levels.1 The value of transactions in the Americas was more subdued compared to Q4 2015’s record level. Globally the total value of transactions in Q4 was USD 268 billion, 11% down from Q4 20152.
As buyers and sellers push to complete transactions before year’s end, high levels of fourth-quarter activity are common. Nevertheless, Q4 2016 went beyond the norm in both APAC and EMEA. The surge was unexpected, given that in the three previous quarters transactions had been running at or below 2015’s levels in both regions.
Transactions in the EMEA region jumped sharply in Q4 2016. The region usually shows a strong seasonal trend, with the fourth quarter substantially higher than the previous three in any given year. However, in 2016 the Q4 increase was bigger than usual and took the total value of transactions to a new record high. This result was achieved despite continued weak activity in the U.K., where investment transactions have slowed since mid-2015. Excluding the U.K., transactions in EMEA increased by 20% in Q4 from a year earlier. Investment activity was particularly strong in Germany, and in Central and Eastern Europe.
Investment in the APAC region rebounded strongly in 2016 after a weak first quarter, culminating in a record quarterly total in Q4, up by 17% from Q4 2015. This was boosted by the completion of several very large transactions across China, South Korea, Hong Kong and India. The 10 largest transactions in the APAC region during Q4 2016 represented some 30% of the total. The Chinese and Korean markets made particularly strong contributions to the Q4 total. In both cases, this resulted in a record level of activity nationally for both the quarter and the year.
Investment activity in the Americas in Q4 2016 fell by 25% from Q4 2015. However, this statistic is somewhat misleading. Investment activity in Q4 2015 was a record for the region by a substantial margin, and included more than USD 22 billion of entity level transactions. With entity level transactions excluded, the decline in the Americas was a more moderate 19%. In addition, the Q4 2016 preliminary estimate is likely to be revised up as further information, particularly on non-U.S. markets, becomes available. The level of transactions in the Americas picked up steadily throughout 2016.
1 All comments and quoted changes relate to the trends as measured in local currency terms unless otherwise stated.
2 When measured in local currency. The strength of the USD in recent years against European currencies means that in floating exchange rate USD the peak quarter for CRE investment transactions in the EMEA region was Q4 2014.
3 For the calculation of fixed exchange rate totals all local currency values are converted to USD using the average FX rate in Q4 2016.