Analysts predict huge growth for global investment in retail real estate, especially in Asia
14-09-2012
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The new global retail real estate report from Jones Lang LaSalle says that this will be growth of around 50% on the projected volumes of US$110 to US$125 billion.
Retail’s overall contribution to real estate investment is expected to sit at close to 30% over the remainder of this decade, an increase from the 24% of the last decade.
Growth markets are projected to account for around one quarter of global retail investment by 2020, compared to less than 10% today. By contrast, established markets will decline from 83% to just above 60%.
The report, presented at the International Council of Shopping Centres 2012 world summit in Shanghai, it reveals that China and India top Jones Lang LaSalle’s Retail Real Estate Momentum Index which identifies the top 20 countries with the strongest momentum in retail real estate globally.
It confirms that in the last decade, more than US$1 trillion of retail real estate has been traded around the world. Global direct investment has averaged more than US$100 billion per year since 2004 and in 2011 annual volumes hit US$122.5 billion.
In 2011 cross border activity accounted for nearly half of all retail investment whilst levels accounted for only one quarter of all trade in 2004. Cross border activity is expected to continue to track at around half of all retail investment, boosting annual investment volumes.
‘The number of investable geographies has expanded globally as growth markets like China, Brazil and Turkey are attracting global investors,’ said Arthur de Haast, head of International Capital Group, Jones Lang LaSalle.
‘Together with an improvement in the quality and availability of retail assets, rising liquidity levels and further progress in real estate transparency, the retail investment sales sector is set for further rapid globalisation,’ he added.
Michael Niemira, ICSC vice president of research and chief economist said that many of the growing retail real estate investment opportunities identified by the Jones Lang LaSalle report also are being supported by an increasing number of countries adopting real estate investment trust (REIT) investment vehicles.
‘The REIT, which provides transparency and ease of investment, has grown dramatically over the last 40 years with 27 countries already offering such financial regimes and currently another seven, China, India, Indonesia, Nigeria, Kenya, Vietnam and South Africa, considering future adoption,’ he explained.
‘The ease of access to cross border and domestic capital and strong consumer fundamentals should provide a solid platform for the growing global retail real estate markets over the next decade,’ he added.
The report also predicts that there will be a general rebalancing in capital flows towards the Asia Pacific region due to favourable demographics and the growth of the middle class. By 2020 Asia Pacific is forecasted to account for 26% of global retail investment volumes, up from 22% currently and from only 11% in the middle of the 2000s. The report projects that the Americas will hold onto around 33% of volumes between now and 2020, whilst Europe the Middle East and Africa around 41% compared with 45% currently.
It says that in light of this trend, institutional capital is seeking greater retail exposure as it taps into favourable global demographics and growing ‘consumer classes’, and is attracted by the sector’s defensive qualities during times of uncertainty.
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