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October 6, 2017

2017 is shaping up to be a year like no other as an increasingly divisive political climate unsettles global markets. But, according to Q3 figures, commercial real estate continues to successfully navigate this unchartered territory.

While global transaction volumes for Q3 came in seven percent down year-on-year at US$155 billion, investment remains resilient at 16 percent higher than the 10-year third quarter average. This quarter’s activity sees year-to-date volumes remain in line with the first three quarters of 2016 at US$451 billion.

Despite gains in Europe and Asia Pacific, investment volumes in the Americas dropped for the third consecutive quarter, leading to questions over whether we’ll see a realignment, or decoupling of regional markets.
While it’s yet too early to tell, JLL’s David Green-Morgan believes that the Americas could be leading the start of the anticipated downturn in the cycle.

“U.S. markets seem unable to break out during 2017, with three quarters of subpar performance indicating that this is more than just a temporary pause from investors,” he says “At present, we see no contagion to the other regions – which are being supported, in some part, by North American capital going global. However, a continuation of this trend without an accompanying adjustment in pricing could see activity plateauing globally into 2018.”

“That said, the weight of capital seeking to access the sector remains significant and, despite being deep in the cycle, investors are actively looking for new ways to deploy funds.’

“With no let-up of political and economic uncertainty in sight, global commercial real estate continues to perform well and, as a result, we still expect full-year volumes to remain more or less in line with the US$650 billion we recorded last year.”

Regional Overview

Americas: U.S. drags region down for third quarter this year
The only region to record a decline, third quarter volumes in the Americas are down 19% year-on-year, led by the U.S. where Q3 transactional volumes fell 23% to US$55 billion and YTD volumes dropped by 15% to US$165 billion. Elsewhere in the region saw a more positive quarter with Mexico and Brazil both bettering their performance from last year while Canada set a record with US$15 billion, up 36% year to date.

Asia Pacific: Singapore, Hong Kong and India keep APAC on track
Continued demand for property in Asia Pacific saw transaction volumes jump up 6% compared to the third quarter of last year, bringing year-to-date volumes to US$96 billion, 11% higher than last year’s total. After a sluggish start to the year, Singapore bounced back and recorded its second best quarterly result on record to bring YTD volumes up 27%. In Hong Kong, a flurry of activity from domestic investors helped boost up third quarter volumes by double digits, bringing YTD investment up 9%. Similarly, strong domestic activity in China has YTD volumes up 10%. Japan was unable to better its third quarter performance from 2016 but thanks to a strong start to the year volumes are still up 3% compared to the first three quarters of last year. Year-to-date activity in Australia is up 6% after a strong third quarter and a mega-deal in India has brought investment to its highest level on record.

EMEA: Hot German and Netherlands markets push Europe up
Despite another turbulent political quarter for the region, Q3 investment volumes in Europe climbed by 3% from the same period last year, bringing year-to-date volumes 6% higher than a year ago at US$171 billion. The German and Dutch markets both reached cyclical highs with year-to-date investment up by 11% and 70% respectively. However, these gains were balanced by year-to-date dips in France (-28%), Sweden (-23%), and Poland (-12%). While the UK’s quarterly and year-to-date volumes were up, in what appears to be a ‘bounce back’ from a year marred by Brexit uncertainty, Q3 activity was still 14% lower than the average in the three years prior to the vote to leave the EU.

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David Green-Morgan

Global Capital Markets Research Director, JLL

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