Economy Watch: Global CRE Investment Forecast for Growth in ’17

Global investment volumes are forecast to rise nearly $700 billion this year, with certain U.S. markets set to be especially strong, JLL reports.

foreign currencyInvestment in the world’s largest real estate markets—including major U.S. markets—will probably enjoy considerable strength this year, a new analysis by JLL predicted. In fact, global investment volumes are forecast to rise to about $700 billion this year, up from $650 in 2016, and roughly in line with investment levels experienced in 2014 and ’15, which were strong years worldwide. Some U.S. investment markets will be especially strong.

This trend in 2017, JLL said, will be supported by increased institutional allocations directed toward commercial real estate because such institutional investors are focusing on higher-yield opportunities. Also, new sources of capital are being unlocked from such growing countries as China, Taiwan and Malaysia. Moreover, the trend will grow beyond 2017. By 2020, cross-border investment globally could account for more than 50 percent of all activity (and as of third-quarter 2016, China outpaced the U.S. as the world’s largest cross-border investor in CRE).

Investment activity in the United States, the world’s largest real estate market, will remain strong in 2017. Currently, the U.S. is home to 16 of the top 30 cities for real estate investment, according to JLL’s ranking. New York is far and away the global leader, with more than $33.1 billion in transaction volumes during the first three quarters of 2016, or nearly double the activity of second-place London.

Los Angeles is in third position (ahead of both Tokyo and Paris), with a 22 percent increase in investment volume over the first nine months of 2016 to $15.7 billion, due to an increase in foreign investment. On the other hand, San Francisco dropped out of the top 12 markets for investment, having occupied one of the top spots for several years, with investment levels off 46 percent during the first three quarters of 2016 compared with the same period a year earlier. Washington DC (6th) and Chicago (8th) held their positions on JLL’s ranking, despite modest falls in volumes in 2016.