Global property deals seen back above US$ 1 trillion in 2013

LONDON (Reuters): Global property deals could exceed US$ 1 trillion this year for the first time since 2007, helped by growing confidence in North America and Asia and a greater appetite among sovereign wealth funds for real estate, a report said.

Property consultant Cushman and Wakefield said it sees global investment volumes rising 14% in 2013, after increasing to US$ 929 billion in 2012.

This would be the highest level since the year before the 2008 financial crisis when investors ploughed US$ 1.25 trillion into property deals.

“2012 was a year of profound uncertainty in the global economy which impeded decision making and market activity,” Cushman and Wakefield chief executive Glenn Rufrano said.

“We anticipate there will be less uncertainty this year and in fact, a true change in market confidence and indeed momentum seems to have been confirmed in the early months of 2013 as major global risk factors are seen to be receding.”

Investors shunned riskier assets across the globe in favour of top quality office and retail properties in the safest neighbourhoods of New York and London against a darkening global economic outlook and the Euro zone’s debt crisis.

Confidence has however edged back in recent months after strong action by the European Central Bank to calm markets eased fears of a Euro zone break-up and the US economy showed signs of improvement.

Cushman expects the growth to be led by North America, particularly in the United States, where a greater availability of debt and demand for space from tenants could drive a 15% to 20% rise in deal volumes after growing 26% last year.

In Asia, where Government policies to cool the housing sector and concerns over the stability of China’s growth saw volumes inch up only 3.7% last year, Cushman said volumes could grow by 15% to 20% as such concerns over China fade and investors target emerging economies such as India and Indonesia.

It said investment in Europe would likely remain subdued, rising only 5% and focused on key cities such as London and Munich due to a lack of bank financing and good quality properties to buy. Demand from sovereign wealth and pension funds looking to increase their allocations to real estate would also spur growth, Cushman said.

Sovereign wealth funds from Malaysia and Qatar have been among the most active buyers of so-called prime properties in Western capitals, while Norway’s US$ 700 billion oil fund said last year it would raise real estate assets to as much as 5% of its portfolio from 0.3%.