Full-year volume of global commercial real estate transactions is projected to decline up to 10 percent in 2016, mainly caused by the uncertainty in activity from the United Kingdom, according to real estate services group Jones Lang Lasalle (JLL).
In a report, JLL said that global transactions for commercial real estate are expected to reach a total of $610 billion to $630 billion for the year, as transaction volumes in the fourth quarter of the year are expected to be lower than last year. The 2015 full-year value of commercial real estate transactions totaled about $700 billion, JLL said.
JLL noted that on average, the final quarter of a year is always “pivotal” as it is usually the quarter that registers the most transactions. However, that is not the case for this year.
“Given the uncertainty around UK activity we are keeping our full-year volume forecast steady at $610-$630 billion, a maximum 10 percent decline on the full-year 2015 figure,” the report said.
The report noted that transaction volumes in the third and fourth quarter of last year recorded at least a 20 percent increase in activity.
A decline in global transaction volumes was already recorded in the third quarter of 2016, as third quarter volume registered at $165 billion. This brought the year-to-date activity through September to $454 billion, 8 percent behind the same period a year ago.
On a regional basis, the Americas posted the largest year-to-date transaction volumes at $207 billion. However, this was 10 percent lower than its recorded volumes in the same period last year.
“Despite a slow start to the year, investment activity in the Americas picked up during the third quarter to stand at $77 billion, 1 percent ahead of Q3 2015,” JLL said.
Similarly, year-to-date transaction volumes in Europe amounted to $160 billion, posting a 10 percent decline from last year’s volume.
“With UK year-to-date volumes down close to 30 percent in local currency terms, it is no surprise that regional levels are lower. However, if we remove the UK from the analysis, European volumes would be flat on a year-to-date basis,” the report said.
Moreover, Asia Pacific posted a flat growth in its year-to-date volume of $87 billion.
“Asia Pacific witnessed a pickup in activity in the third quarter with $33 billion recorded, 5 percent ahead of Q3 2015 and 17 percent up on Q2 2016,” JLL said.
Despite the expected lower transaction volumes for 2016, the real estate services firm noted that it anticipates that next year’s volumes will rebound to close to the $700 billion achieved in 2014 and 2015.
“For the full-year 2016, investment and leasing volumes are likely to be only 5 percent to 10 percent below the exceptional levels of 2015, with some upside potential in prospect for 2017,” the report said.
However, JLL noted that overall rental and capital value growth is likely to slow over the next 12 months as new supply comes through and more markets move into balance.
Furthermore, the report also noted that year-to-date global leasing volumes is 4 percent lower than 2015. This is expected to continue into the fourth quarter, with full-year volumes projected to be up to 5 percent lower than 2015.
“JLL expects global leasing volumes to hit about 40 million square meters in 2017, similar to 2016 levels,” the report said.