With most countries finally emerging from the crisis, consumer confidence on the increase and low interest rates in many key locations, international property is on track for an excellent year. Investment volumes are growing, new developments on the increase and rentals struggling to keep up with demand. Key property investment markets for this year include the US, London, New York and Europe’s recovering economies.
The conclusions reached in Global Market Perspective Q2 2105 compiled by Jones Lang LaSalle (JLL) could not be more positive. The report finds international real estate in “a steady pattern of growth” with the main markets “displaying an air of quiet confidence”, built on expectations of intense activity for the rest of the year.
The report divides the pillars of this confidence into three areas: investment volumes, new development projects and the leasing market. All three have performed well this year and all are predicted to experience significant growth over the next six months.
According to JLL, investment volumes will rise by 5 per cent this year on the back of high levels of equity and low interest rates in many key markets such as the US and Europe. New developments are also booming with deliveries predicted to go up by 35 per cent in an attempt to meet growing demand. In the leasing market, absorption will grow by 20 per cent due to the increase in demand in all sectors and steady rental growth.
JLL pinpoints the US as the world’s leading property investment market. Here, volumes have risen by 24 per cent over the last 12 months and JLL expects further growth throughout the rest of the year. Growing consumer confidence and retail sales have led to optimism among investors in the US where key investment markets are offices in New York and apartment rentals. In both these investment niches, demand outstrips supply – offices vacancies in the Big Apple currently sit below 10 per cent.
Europe’s recovering economies, namely Spain and Italy, also provide good scope for property investment. JLL reports that the risk curve in these countries is moving up, especially in the retail market. In Spain and Ireland, the outlook has improved considerably.
The office market features as another highlight on the investment front, particularly as international economic and employment levels rise. This year, JLL predicts an increase of 20 per cent in office absorption and a growth of 4 per cent globally with Tokyo and the main cities in the US expected to be the best performers in rental returns.
Retail, warehouse and hotel sectors
In terms of retail investment, Miami and New York stand out for strong growth with good potential noted in the retail markets in Tokyo, Australia and South East Asia. The warehouse sector is another boom area and JLL reports that demand for warehouse space is growing throughout the world. The highest levels of growth are found in the world’s transport hubs such as Los Angeles, London, Tokyo and Hong Kong.
JLL highlights the hotel sector as one of this year’s star investments. Transaction volumes reportedly rose by over 80 per cent in the first three months of this year and JLL expects to see a total of US$68 billion change hands in hotel investment by December in a market where investment funds and private equity companies are particularly active.