Commercial real estate investment sales volume fell 19% globally in Q1 2016 compared to a year earlier. Is this a sign of change in the capital markets after five years of steady growth, or a temporary blip induced by global economic jitters?
Real estate capital flows are well supported by a growing global economy, but volatility, including geopolitical events, will continue to ruffle markets.
With the marketplace digesting the U.K.'s vote to leave the EU, some property investors are likely to take a “risk-off” approach, while others see it as a buying opportunity.
Global real estate
The globally correlated drop in property investment shows how interconnected commercial real estate markets have become.
U.S. lenders are pricing risk and underwriting more conservatively, which, coupled with healthy market fundamentals, is leading to a more sustainable market relative to the 2006-2007 peak.
Chinese appetite for property abroad continues to increase—even as its domestic markets improve and gateway cities grow pricier.
Alternative property sectors are growing more popular in European markets as the search for yield intensifies.
In a world of ultra-low interest rates, property returns remain very appealing to investors—and Brexit-fueled volatility will push the return to “normal” interest rates further out.