The commercial real estate investment market in 2012 was consistent but not overly exciting
There was a 4% rise in transactional volumes, but behind this figure lurk a few interesting signals of what might be to come. Firstly, the cross-border
proportion of this total rose to almost 25%, its highest level since 2008.
The latest data from Real Capital Analytics
shows that, once again, London was the most popular destination in 2012, with just over $21bn (£14bn) invested. This dwarfs the other big global centres such as Paris, Manhattan, Frankfurt and Tokyo, which between them attracted only $20bn of inward investment. However, behind this continued risk-aversion
are some interesting local stories, with rises in activity in some more peripheral locations, such as Dublin, St Petersburg, Guangzhou and Shenyang. Also, although it will not show up in the deal
data, we have noticed very sharp rises of interest in locations that are looking close to bottoming out, or where asset-specific pricing is being
affected by wider economic caution. Investor demand will continue to focus on debt
portfolios, and we estimate that, globally, there remains $11tn of outstanding commercial property debt. But there will also be some focus on the direct market and areas of mis-pricing because of over-cautious views on sectors, regions or countries. The next story for the debt-starved western
world will be one of lack of development and localised undersupply, which will combine with tenant austerity to drive a rise in demand for good-quality fringe or grade B assets. The final big trend for 2013 and beyond will be
the hunt for yield, although risk-aversion will undoubtedly continue and will maintain or harden prime yields. And although the gap between prime and
secondary yields may not close this year, it will happen soon and the best investment deals will be done before the rest of the market has realised the recovery has even begun.
Mat Oakley, director of commercial research, Savills UK
Behind this continued risk-aversion are interesting local stories, with rises in activity in more peripheral locations