Emerging from one of the most politically unstable years of recent times, the first quarter of 2017 has seen the global economy perform better than many anticipated, with improving economic indicators in Europe, the continuation of the Trump Trade in the U.S. and Australia setting a new world record for uninterrupted GDP growth.
And, against this supportive economic backdrop, a pipeline of real estate investment activity has emerged. While global transaction volumes in the first quarter of the year slipped slightly, standing at US$134 billion, 2 percent lower than Q1 2016, the buildup in activity is forecast to bear fruit through the rest of the year.
Traditionally the slowest quarter, David Green-Morgan, JLL’s Global Capital Markets Research Director explains that while the Q1 figures are down, global real estate markets are likely to hold strong in the coming months.
“While Q1 has come in roughly where we anticipated, we are seeing a surge in investment stock on the market as vendors take advantage of record pricing in many markets with a pick-up in activity – particularly in Europe, America and Australia – which will translate positively in the Q3 and Q4 transaction volumes.”
“Brexit negotiations, European elections and the U.S. interest rate hike made for an interesting climate throughout the quarter and, in the resulting environment of booming equity markets and lagging bond yields, real estate remains an attractive proposition from a yield perspective.”
“Our forecast for full-year 2017 remains stable at around US$650 billion but if we continue to see the same level of investor activity, we will look to upgrade this at the end of Q2,” he says.
Starting the year at more or less the same pace as 2016, Asia-Pacific volumes were in line with Q1 2016 at US$25 billion. Leading the region, Hong Kong and Japan both recorded quarter on quarter growth of 33 percent, and came in slightly higher than Q1 2016 while Singapore saw volumes close to US$2 billion, more than double the same quarter last year. Although expected to improve during 2017, at -40 percent, Australia is well down on a year ago due to a lack of stock, while China and South Korea are both slightly behind the first quarter of 2016.
Outperforming the rest of the world, EMEA was the only region to see an increase in y-o-y volumes, coming in 6 percent higher than Q1 2016 at US$53 billion. As Brexit uncertainty starts to mitigate, the UK saw the largest quarterly volume since Q4 2015 in local currency terms. Both France and Germany are running ahead of their 2016 pace with Germany having the strongest Q1 on record, however there is room for caution with both countries facing elections in coming months. The Nordics and Central and Eastern Europe continue to build on their strong performance from last year, with Sweden and the Czech Republic leading each sub-region.
With transaction volumes of US$55 billion, The Americas were the most active region in the first quarter. Q1 2017 came in 10 percent down year on year with much of the decline driven by the United States which saw year-on-year volumes dip by 12 percent. Mexico surprised as the region’s bright spot with volumes more than doubling from Q1 2016 as Canadian volumes came in flat year-on-year at US$2.5 billion, while the ever volatile Brazilian market saw just over US$500 million transacted in Q1, well above the same period of 2016.
Global Capital Markets Research Director, JLL