It will be difficult for the global investment market to meet the robust levels of the last few years, with investment volumes across the globe likely to be 5-10 per cent lower than in 2017.
Investors will find new ways of accessing real estate, focusing less on single asset acquisitions and more on multi-channels entity level deals, recapitalisation or debt refinancing.
According to JLL’s 2018 Global Market Perspective research report, 2017 was a good year for commercial real estate and — barring any major shocks — 2018 will follow a similar track.
Office leasing activity across the globe saw an increase in demand this year, up 3 per cent on the same period of 2016. Europe reportedly took the lead on the back of employment growth and buoyant business sentiment, while the US witnessed a strong surge in demand in the third quarter as supply options increase.
With leasing volumes between 2%-5% higher than 2016, JLL reported that the world will be on track for good year for occupier demand in 2018, with annual volumes expected to be broadly stable on 2017 levels, supported by higher global economic growth and increasing supply options.
Rents for prime offices across 26 major markets have grown at a healthy clip of 4 per cent year-on-year, an improvement on the 2.7 per cent recorded for the full-year 2016.
Investment activity in the Americas declined for the third successive quarter, with volumes over the first nine months of 2017 down 11 per cent from last year. Elsewhere in the region Mexico also saw volumes declined by 11 per cent, while both Brazil and Canada managed to better their performance from last year.
[Related reading: What to Expect in November 2017: CoreLogic]
European capital markets remained active as investment volumes over the first nine months expanded by 14 per cent compared with the same period a year ago. JLL reported that the German and Dutch markets continued to perform strongly, with investment rising to cyclical highs while in the UK, volumes climbed 28 per cent in a “bounceback” from a year marred by Brexit uncertainty.
Continued demand for property in Asia Pacific saw third quarter transaction volumes edge up 5 per cent compared to last year, bringing nine-month volumes 12 per cent higher than 2016.
According to JLL, those who occupy commercial space have followed the trend of focusing on talent, technology and flexibility. Tightening employment conditions across North America and Western Europe have led to increased corporate efforts around sustainability, as well as health and wellness in the workplace.
The transformation of building operations and facility management due to technological innovation is just beginning to take shape, and the pace is accelerating rapidly. With a demand for portfolio flexibility, JLL estimated that fully 30 per cent of all commercial office space will have some flexible component by the year 2030, and the robust growth of the co-working space over the past year validates this trend.
Investment and leasing markets should remain broadly stable through 2018 with the global economy in its best shape since the Great Recession.