Global real estate markets - Annual review & amp; forecast
By the end of 2007 as the credit crunch spread to all corners of the capitalmarket; the downward repricing of commercial real estate assets had begun. The transparent nature of the UK market has been quick to eflect this. In New York, the initial impact of the credit crunch resulted in a urtailment of salesactivity, with the volume of investment sales markedly own in the last quarter of 2007 from the same period in 2006. In most other regional markets, the pace of investment activity had not been as agressive, so the slowdown was not as dramatic. Nevertheless, it did start in these other markets and will surely continue for at least the first half of 2008. This report by Knight Frank gives an overview of the global real estate market in 2008 and previews the coming year.
The actual property operating fundamentals, however, continued to perform quite well throughout 2007. In New York, for example, the amount of leasing activity and the net absorption of space did slip in 2007 from the levels in 2006, but both remained positive. A very low vacancy rate was maintained and there was continued upward pressure on rents. In virtually every major marketaround the world, vacancy rates were low and rental growth remained in force.
Global economic growth sustained itself in 2007, but major shifts in relative strength were clearly apparent. High oil, metals, and agricultural prices along with the foreign trade deficit were draining growth from the US economy. Europe and Japan began to be impacted by the same factors. The net exporters in Asia and the commodity producers in other parts of the world prospered.
It appears that the property market operating fundamentals in 2008 are likely to follow a similar cycle. In 2008, vacancy rates could move upwards in many US and European office markets, while prime rents are likely to grow at a slower rate, or may even fall in some markets.
While the broad contours of property performance in 2008 are fairly apparent to most, it is, however, extremely difficult to quantify the precise dimensions of the cycle. The global economy and as a result the property markets are sailing into a storm in 2008. This tempest, however, was not anticipated by the forecasters or the captains of industry, even as the winds started to blow. More troubling, they are still uncertain about what caused the storm, its length, how widespread it will be, or its severity.
The collapse of the US subprime residential mortgage market has been held largely accountable, but the eventual losses in the US subprime mortgage market are expected to total $200 billion, a very small portion of the equity and reserve base of the global financial system. The protracted credit crunch has tobe the result of some broader event, like the repricing of risk, and the credit and capital markets are still sorting out what will be the equilibrium risk adjusted yields. As a result, there has to be some legitimate ambivalence about both the operating performance and the market valuation of real estate assets during the next year.
An annual report, produced by Knight Frank in conjunction with Newmark, the Global Real Estate Forecast provides an overview of the world's major property markets. Also assessing the future prospects of the world's office, industrial and retail markets the report features regional tables ranking the strength of local markets, taking into account a balanced mix of economic, demographic and property information.
Contents of the report
- North America office
- South America office
- Europe office
- Asia-Pacific & Africa office
- US retail
- Europe retail
- Asia-Pacific & Africa retail
- Australia outlook
- US industrial
- Europe industrial
- Asia-Pacific & Africa industrial
- Global office asking rents
Knight Frank - Europe, Asia-Pacific and Africa
Knight Frank Research
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