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January 10, 2017

The final quarter of 2016 marked the pinnacle of a year characterised by political uncertainty and capital market volatility as investors battled with yet another shock election result.

Despite this, global real estate investment markets have weathered the storm to reach full year volumes of US$651 billion, slightly higher than forecast, according to JLL.

The fourth quarter of the year saw global investment activity of US$196 billion, 7 percent lower than Q4 2015. While this also mirrors the full year decline against 2015, much of this annual underperformance can be attributed to the first quarter, after which markets were playing catch up for the remainder of the year.

“We must remember that 2015 was one of the most active years on record so, while global transaction volumes are down year-on-year, the market has held up well, particularly given the uncertain political and economic environment,” says David Green-Morgan, Global Capital Markets Research Director for JLL.

“The year has ended at the top of our latest forecast range and the market seems to be maintaining this positive momentum into the first quarter of 2017.”

As President- elect Trump takes office, the UK battles on-going Brexit negotiations and several European nations head to the polls, 2017 is unlikely to see an end to political and market uncertainty. However, the amount of capital targeting real estate across the world remains a constant says Green-Morgan.

”Although we may see a narrowing of the relative value against other asset classes, we still see a significant pipeline of real estate opportunities. For 2017 we are forecasting that volumes will slightly exceed the US$650 billion of 2016 with the possibility of a move towards the US$700 billion mark of 2014 and 2015 on the back of stronger global growth.”

Regional overview

Asia Pacific
The only region to see an increase in activity on 2015 in the final quarter of the year, Asia Pacific’s full year volumes were broadly in line with the year before, at US$128 billion. While performance in two of the region’s biggest markets, Australia and Japan, was down on 2015 by 17 percent and 1 percent respectively, China recorded an increase of 19 percent.
However, the real outperformance in the region came from Singapore – where volumes are up 35 percent – and South Korea, which has seen volumes double from the previous year.

EMEA
Although European volumes have battled a rollercoaster 2016 with the UK suffering a 30 percent decline in local currency terms, overall volumes have dropped by only 11 percent in Euro terms and 12 percent in USD to come in at US$236 billion for the full year. Outperforming throughout the year was Germany and the Central and Eastern European states (CEE), up 11 percent and 70 percent on 2015 respectively, with Poland and the Czech Republic seeing 80 percent of overall activity in the CEE.

The Americas
After a sluggish start to 2016, volumes in the Americas gradually regained ground to finish the year at US$286 billion, 9 percent lower than 2015. Although the final quarter was 6 percent lower than Q4 2015, at US$79 billion, it was a great improvement on the -16 percent and -14 percent recorded in the first two quarters of 2016. U.S. performance mirrors the regional decline while Canada slightly outperformed the rest of the region, finishing the year just 3 percent below 2015 levels.

David Green-Morgan
Global Capital Markets Research Director, JLL

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