Six Out of 12 Major Global Markets Experienced More Than 30% Increase in Office Investment Volume in 2006
CB Richard Ellis Group, the world’s leading commercial real estate services firm, today announced that Investment in office buildings continues to surge around the globe, with markets in Asia and Europe experiencing the most significant increases in activity in 2006, according to its inaugural edition of Global InvestmentView, a new semi-annual report.
Investment across borders has also increased, as competition among investors, yield compression, and a limited pool of desirable assets has led investors to broaden their geographic search for opportunities.
At year-end 2006, six out of 12 major global markets posted more than 30% year-over-year increases in office investment volume. In Asia, Beijing recorded RMB$29.8 billion (US$3.7 billion) in activity, well above the prior year’s RMB$16.7 billion (US$2.1 billion). Singapore saw S$4.4 billion (US$2.7 billion) in investment sales, more than twice the S$1.9 billion (US$1.2 billion) registered in 2005. Meanwhile, Shanghai posted significant volume totaling RMB$22.6 billion (US$2.8 billion) in 2006.
In the United States, the New York investment market showed no signs of cooling, as more than US$23.3 billion of office properties traded in 2006, up 31% from 2005’s US$17.7 billion. In the major European markets, London was the most liquid property market with a 2006 investment volume of £15.0 billion (US$27.6 billion), while Paris’ €16.9 billion (US$21.2 billion) nearly doubled its previous year’s €9.1 billion (US$11.4 billion) total.
Concurrent with the increased investment volume was a substantial rise in cross-border investment activity. In Asia, the Shanghai market led the way, attracting nearly RMB6.4 billion (US$803 million), more than twice the RMB3.0 billion (US$376 million) recorded in 2005. American investors were responsible for RMB2.5 billion (US$313 million) of Shanghai’s investment sales total, up from RMB2.0 billion (US$251 million) a year earlier. In Hong Kong, the top foreign investors were Australian buyers, who acquired over HK$5.0 billion (US$643 million) in assets during the past year.
Middle Easterners were the biggest foreign investors in the U.S., with over US$5.0 billion in acquisitions. In 2005, Australians were the largest foreign investors in the U.S., purchasing over US$8.5 billion in real estate, and adding another US$3.7 billion in investments in 2006. Foreign investment in Canada reached CAN$4.0 billion (US$3.5 billion), surpassing its 2004 peak of CAN$2.8 billion (US$2.4 billion).
"The increasing volume of global office investment activity over the past five years reflects the abundant institutional and private investor capital that has been allocated to real estate and the migration of this capital across borders in pursuit of opportunity," said Gregory S. Vorwaller, President of CBRE’s Investment Properties Group. "Diversification across both geography and property types will continue to drive investment portfolio decisions around the world."
Dublin
CBRE says that 2006 proved to be an exceptionally active year in the Dublin office market with a record 201,000 m2 of office accommodation let in the Irish capital, of which 62,353 m2 was completed in Q4 2006. This is the highest level of annual office letting activity ever recorded in Dublin. This level of letting activity has not been seen in Dublin since 1998 when over 185,800 m2 of office accommodation was signed during what was the height of the technology boom. During the first half of 2006, it appeared that office take-up in Dublin would match 1998 levels but two exceptional quarters in the second half of last year resulted in this estimate being exceeded.
Dublin rents were US$92.50 per square foot per year in Q4 2006, compared with Brussels at $53.07, Berlin at $33.89 and Amsterdam at $46.38.
Global InvestmentView reports on global investment values worldwide, cross-continental investment, and trends in yields and capitalization rates. Other findings in the report include:
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Since 2002, 10 out of the 12 major global markets experienced a 100% increase in office investment volume.
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Rising global investment—partially fueled by an enormous growth in institutional capital—has significantly increased competition for core office properties, causing cap rates and yields to fall worldwide.
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The cap rate in the U.S. rose above 7% in the second quarter of 2006—the first time in nearly four years that it has increased. Cap rate compression in Canada has continued, albeit at a significantly slower pace compared to the previous two years.
