Research article

Selling The World

The amount of global investable real estate traded is at its highest level since 2008 – a recovery that’s taken place over four specific phases.

Construction in Wuhan’s Han Street business district

▲ Construction in Wuhan’s Han Street business district

A total of $8.1 trillion of global investable real estate has been traded since the beginning of 2007 in the form of big ticket ($10 million-plus) deals. Of those deals, $2.2 trillion-worth were made up of Chinese development land deals. This represents 3.7% of all global real estate and 11.1% of all tradeable investment stock.

Just under 1% (0.9%) of the world’s investable real estate stock trades in big ticket deals each year.

Average annual real estate trading volumes (excluding Chinese land) since 2007 have been $683 billion, which is 39% lower than the global peak of $1.13 trillion in 2007.

Volumes have increased steadily since 2012 and, last year, they reached their highest level since the global financial crisis of 2007-08 (GFC) began. In 2014, volumes were $871 billion and we project that they will hit $887 billion in 2015. This is 338% more than their 2009 low of $262 billion.


FIGURE 1Total global investable real estate invested in Chinese development land deals


Global trading in real estate since the financial crisis of 2008 has seen four distinct phases: downturn, bounce back, cooling and stability (excluding Chinese land deals and joint ventures, see fig.2).

Figure 2

FIGURE 2Global investment volumes (all buyer types)

Sources: RCA (>$10m deals)/Savills World Research


Q1 2008 – Q3 2009

In the aftermath of the GFC, investment activity was substantially reduced, especially in North America, where it fell by 84% from $418 billion in 2007 to an average annual figure of $93.7 billion over this period.

As US volumes fell, EMEA took over as the region with the highest real estate trading volumes during this period – averaging $151.8 billion per year – while Asian trading volume fell the least (61%), buoyed by stronger economic growth in China and Asia Pacific countries and a growing appetite for real estate.

Globally, and especially in North America, institutions that had been dominant buyers in 2007 reduced their trading volumes by 79% in the downturn. This impacted all the major real estate asset classes equally, except for development land, which was held up because it was being traded in large quantities in China.

The market share of owners, users and operators increased during the downturn period as their reasons for trading were less investment-motivated and therefore less affected by recession in these markets.

Bounce back

Q4 2009 – Q3 2011

The impact of quantitative easing during this period was profound and continued to last for more than five years. Low interest rates and expectations of lower yields resulted in increasing expectations of significant value inflation in a range of commodities and asset classes, not least real estate. The end of the last quarter of 2009 marked the beginning of this turnaround in global stock markets. World-class real estate markets quickly followed suit and global real estate investment volumes were showing annual rises by the fourth quarter.

The most active players during this period were the more opportunistic REITs and REOCs, who had been net sellers to institutions in 2007. They were able to reenter markets at lower pricing points and, with their listed status, raise funds in the newly reinvigorated stock markets.

The biggest recovery in transaction volumes was in markets that had been hit hardest in the downturn because they came off a particularly low base. Over and above this, though, a notable change happened in the appetite for sectors previously considered more alternative or niche. It also marked a period of much lower market share in the office markets. The volume of office trading simply did not bounce back to the same extent as other sectors.

Hotels and industrial property showed the strongest rebound, while the apartment market started a sustained increase in market share, which has since not abated. Volumes in residential property increased by 150% as some buyers took advantage of bulk deals from distressed owners and developers. The number of hotel deals also increased by 221% over the same period, for similar reasons. This period, therefore, marked the beginning of a maturing process for some sectors.


Q4 2011 – Q3 2012

This cooling period relates to a period of much slower rates of growth in the volume of big real estate trades. Average global volumes were still slightly higher during this phase than they had been. The slowdown in volume growth rates was led by Europe as investors, particularly institutions and REITs/REOCs, became somewhat more nervous in the wake of the eurozone debt crisis and began avoiding euro-denominated assets. EMEA volumes fell by 10% over the period.

Private investors came to the fore during this phase, taking market share where the less adventurous corporate buyers left off. This helps to explain the resilience of residential property, an asset class favoured by these investors, during this period. It was a relatively short phase of global jitters compared to the downturn and started to reverse when the Fed announced yet another round of quantitative easing (QE3).


Q4 2012 – Q3 2015

For the past three years there has been a period of steady growth in global real estate trade volumes, particularly in North America and EMEA, which have grown by 62% and 65% respectively. Annual North American volumes have been $322 billion, compared to their 2007 peak of $418 billion. Annual EMEA volumes have averaged $246 billion, compared with $355 billion in 2007.

Asia Pacific (APAC) has seen much more subdued rates of growth in average annual trading volumes – at 18% over the same period – partly as a result of slower economic growth in China. Having said this, APAC volumes are the closest of any world region to their $160 billion 2007 peak, having averaged $155 billion during the stability phase.

Hotels and apartments have continued to grow as sectors during this period but development sites have shown weak growth (even without counting the sharp demise in Chinese land deals).

This period of stability has particularly favoured those investing institutions whose participation in deals has increased by 69% during the latest stable growth phase of Q4 2012-Q3 2015.

Figure 3

FIGURE 2Global capital flows in 2015

Sources: RCA/Savills Research

The biggest cross-border capital flow in real estate during 2015 was from North America into Europe at $75 billion. This was more than double the volume of deals done in North America by North Americans ($32bn) and was also bigger than the amount invested in Europe by Europeans ($68bn).

North America was the biggest buyer of world real estate overall in 2015, spending $121 billion, 74% of which ($89bn) was outside the region. APAC came a close second in total global volume terms at $112 billion, with 47% of cross-border spending ($53bn) focused on its regional Asian markets.

Europe received a total of $183 billion into its real estate markets in 2015, 63% of which originated overseas.


Inward investment from overseas is more important to European real estate markets than Asian and American ones. Prior to the GFC, Asia was a greater recipient of overseas real estate investment, with one in every two domestic deals bought by investors outside the region. It is now more like the Americas, which see just over one deal in every ten traded outside the region.

EMEA, though, is a much more global real estate market. In 2007, there were more cross-border deals done than trades within the region. This plummeted in 2008-2009 but has since picked up strongly. Crossborder deals by a wide variety of international players now account for 8 in every 18 EMEA deals (see fig. 3).

Figure 4

FIGURE 4Cross-border to domestic investment ratio (rolling annual)

Sources: RCA/Savills Research

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