Property investors shift focus from Asia to Americas
The Americas was the best performing region globally for real estate investment value, according to the Q1 2012 CBRE Global Office Capital Value Index. This marks a shift from 2011, when Asia Pacific set the pace for global real estate investment performance.
“There has been a marked increase in investor interest in the Americas’ prime properties over the last year and this is reflected in the CBRE Americas Capital Value Index,” said Dr. Raymond Torto, CBRE Global Chief Economist. “Last year at this time the Americas was showing respectable gains, but were far behind the 19% annual performance witnessed by the Asia-Pacific Capital Value Index. The year-over-year change in capital values for the Americas in Q1 2012 was 9.6%.”
CBRE Global Office Capital Value Indices Annual Growth Rates
|Q1 2011||Q1 2012|
CBRE global capital value indices
The CBRE Indices measure both office capital values and rents for prime office properties globally and in the three major regions. Over the last year the Global Capital Value Index rose 5.7% while the Global Rent Index rose 3.4%. However, most of the gains were in the early part of the one-year period as both capital values and rents lost upward momentum as the year wore on. Analyzed by region, the CBRE Indices show:
The Americas Capital Value Index showed the strongest improvement in Q1 2012, leading on the basis of both quarterly and year-over-year gains. It is important to note that the CBRE Global and Regional Office Capital Value Indices measure capital value growth for prime office properties. Investors remain risk adverse and highly selective and are most willing to divert capital to high-quality, prime assets. While expanding noticeably, the Index still stands 17.4% below its pre-recession peak.
EMEA’s Office Capital Value Index dropped 99 bps in Q1 2012 but remains 0.7% higher than a year ago. Investors in this region also continue to take a defensive posture and are primarily focused on less risky assets or assets available in core or prime markets.
While office capital values have been recovering for several years now, only the Asia Pacific Office Capital Value Index has surpassed its pre-recession peak and stands at 208.5; relative to the pre-recession peak, Q1’s index value is now 1.1% above that peak and has recovered 31% from its pre-recession trough (of 159) recorded in Q3 2009.
The global leasing market
While global office capital values have expanded robustly, the global occupier market continues to see moderate demand, limited expansion of space requirements and tepid rent increases.
The Global Office Rent index remains 10.2% below its pre-recession peak value of 120 and the improvement over the past year has been modest, with a 3.4% growth rate.
Since its low point in Q1 2010, the Global Office Rent Index has undergone a gradual recovery, rising by 8.0%. The rate of quarterly improvement has slowed to just 12 basis points (bps) in Q1 2012, reflecting a tempering of occupier demand in today’s challenging macro environment.
While the Americas office market is recovering slowly, the rate of improvement was the weakest for the Americas Rent Index since its trough in Q4 2010. That said, the Rent index’s quarterly gain was the strongest of all three global regions in Q1 2012.
EMEA’s rental index experienced the smallest peak-to-trough decline during the Financial Crisis and stands the closest, 8.2% below, of all regions to its pre-recession peak.
The Asia Pacific office market softened during Q1 2012 due to global financial market concerns as well as slower domestic economic growth. Whereas in previous quarters the Asia Pacific index was the primary driver of Global index growth, Q1’s quarterly growth was only 2 bps.
The CBRE Indices were created by CBRE Research. The Global Office Rent Index is comprised of data from 123 cities around the world. The Global Capital Value Index uses the same sample for EMEA and Asia Pacific, while the Americas data is derived from the National Council of Real Estate Investment Fiduciaries (NCREIF). The base period for the indices is Q1 2001.