Global invested stock is predicted to grow by 5 per cent in 2010 to US$ 11.4 trillion with European invested stock expected to rise by 4 per cent
DTZ identifies 85 per cent of the markets in Europe with price levels at or below fair value2 while 90 per cent of markets across the globe are classified as buying opportunities
London City, Paris , Brussels and Moscow offer attractive buying opportunities in the office sector
Lender and investor surveys show marked improvement in the outlook for 2010 – 2011
China to become the second largest real estate market in the world by the end of 2011 – overtaking the UK and Japan
DTZ’s flagship Money into Property report predicts that the worst of the property slump is over and forecasts that global invested stock will grow by 5 per cent in 2010. European invested stock is expected to rise by 4 per cent this year as capital values continue their recovery. This more positive outlook contrasts with a second consecutive year of decline in invested stock in Europe, by 8 per cent in 2009, and a first decline for Continental Europe.
DTZ forecasts that China will become the second largest real estate market globally by the end of 2011 – ranking only behind the US and overtaking Japan and the UK. The UK and France are the only European countries that are expected to feature in the top 5 global ranking by invested stock in 2011.
Hans Vrensen, Global Head of Research at DTZ, comments: “2009 was a tough year for real estate markets worldwide and saw the value of global invested stock decline by 6 per cent. However, the global real estate market is over the worst and we expect to see a return to growth in invested stock value this year, in line with the consensus macro-economic forecasts for a sustainable economic recovery worldwide.”
Transaction volumes across Europe declined by 44 per cent in 2009, despite a quarter-on- quarter increase since their lowest level in Q1 2009. European and global cross–border investments almost dried up in 2009 declining a further 59 per cent from the 2007 peak. In this negative global picture, Asia Pacific investment flows into Europe and especially the UK, were the only bright spot with a growth of 31 per cent in 2009.
Magali Marton, head of DTZ Continental Europe and Middle East Research said: “Continental European property markets were unable to avoid a decline in 2009. The last year was very difficult for both investor and occupier markets, but fortunately, the worst seems to be behind us. Globally, investors and lenders are expecting to do more business in 2010 than last year and Europe remains one of the favourite markets for cross-border investors.”
Based on its forecasts, global real estate adviser DTZ recommends that investors become pro-active buyers as a wide spread of European markets offer attractive ongoing investment opportunities for the next two years. DTZ Research identifies 151 out of 172 markets, or 90 per cent, across the globe as offering fair value in 20102. This is in contrast to last year, where only one international market, London City, was at fair value.
Tony McGough, Global Head of Forecasting & Strategy Research at DTZ, comments: “What a difference a year makes. This time last year we recommended investors to wait on the sidelines as almost all commercial property markets worldwide were traded at prices above their fair value. This year, following a marked repricing of the market, our research shows that there has seldom been a better time to invest in prime commercial real estate.”
In Europe, 87 per cent of markets are at or below fair value, up from 20 per cent a year ago. Magali Marton commented: “Based on our forecasts, it is now the right time to buy in Europe, especially in Belgium, France and Germany. Retail is the most attractive sector with a wide spread of markets offering opportunities, including some countries in Central and Eastern Europe.”
DTZ predicts that buying opportunities for prime stock globally will be limited in 2010. It recommends that investors who are not confined to the domestic market seek opportunities in Continental Europe and Asia Pacific where there are more opportunities to purchase prime real estate.
Overall, DTZ’s positive outlook is reinforced by its Investor and Lender surveys which both reveal an increase in confidence for 2010 and 2011. Two-thirds of lenders are expecting to increase gross new lending in 2010 and 2011, and no respondents expect to reduce lending to the commercial real estate sector over this period. This is a marked improvement on sentiment last year when half the lenders expected that they will be decreasing gross lending volumes in 2010. DTZ’s Investor survey demonstrates rising confidence: 76 per cent expect to increase their own net investments into commercial real estate in 2010, rising to 94 per cent in 2011.
The improvement in investor and lender sentiment is supported by DTZ Research’s analysis of the funding environment. The legacy debt issue is not as big a problem as originally feared as there is sufficient new equity capital available globally. In particular, there is deal-specific evidence of new equity being put in place and DTZ Research expects increased pressure on both debt and equity to further accelerate this process.
