Research: U.S. Markets Ride Rising Global Investment Tide

Global investment volume rose 17 percent year-over-year during the fi rst half of 2015 (H1.2015), totaling $420.3 billion, according to Real Capital Analytics (RCA).

Benefitting from stronger economic performance and improved market conditions, the Americas recorded the highest volume—$218.3 billion, followed by the EMEA region (Europe-Middle East-Africa) with $144.0 billion, and Asia Pacific which posted $57.5 billion in transactions during H1.2015.

Office properties remained the top choice for investors seeking income properties, comprising 35 percent of total volume. Th e retail and apartment sectors rounded up the top three, accounting for 23 percent and 20 percent of total, respectively. Industrial and hotel investments totaled $91.9 billion, making up a combined 22 percent of total.

Even with a stronger dollar on the currency markets, the United States continued as a dominant market for commercial real estate. Sales volume totaled $211.1 billion in H1.2015, a 43 percent gain year-over-year.

The other countries with large capital inflows were Norway, which witnessed a 393 percent yearly increase, as well as Italy and Spain which posted investment volume growth of 109 percent and 43 percent, respectively. Commercial markets in Canada, France, China, Japan and Sweden experienced investment declines exceeding 19 percent compared with the prior year.

With the top 10 global cities accounting for 37 percent of total global transactions, commercial real estate markets in the United States accounted for seven of the top 10 investment destinations. New York retained its number one position for the fifth year in a row, with sales volume of $36.8 billion in H1.2015. London retained the second spot for the sixth consecutive year, with investments totaling $29.7 billion. Los Angeles and San Francisco were the third and fourth most active markets, accounting for $16.9 billion and $15.8 billion in transactions, respectively. Tokyo rounded up the top fi ve metros. Chicago, metropolitan Washington, DC, South Florida (Miami) and Dallas were the other U.S. cities in the top ten global markets during H1.2015.

As fundamentals in U.S. markets improved, investors have moved beyond the gateway metros toward secondary markets, boosting investments. Orlando climbed from the 44th top global market to the 24th most active market, posting 280 percent year-over-year sales growth. Atlanta, Seattle, Houston, Phoenix, San Diego and Austin moved higher up in the global classifi cations, as well.

RCA data (which centers on transactions above $2.5 million), at the higher end of the market international investors have accounted for 8–10 percent of total U.S. sales over the past four years. The comparison highlights the active role that REALTORS® play in facilitating cross-border investments.

With U.S. investment volume poised to touch $500 billion in the next year, commercial assets are well-positioned for continued growth. While high prices and low yields have been a cause for recent concern among some analysts, low interest rates continue to provide a favorable environment, where returns on commercial real estate investments remain an attractive proposition.