By Simon Mallinson on November 26th, 2019
Offices, in aggregate, remain the number one choice for property investors around the world. So far in 2019, more than $279 billion has been spent on office properties, which is $90 billion more than has been spent on apartments, the next most popular sector.
However, as a percentage of total market activity (excluding land sales), the share of the office sector has been falling. It peaked at 46% in 2009 and has since dropped to 36%. The corollary of this trend is the increased interest in the apartment sector and the industrial market, which have both grown in response to structural changes in how people shop and live.
Paris is the world’s number one office market so far in 2019, a consequence of the Brexit-induced slowdown in London and a relatively sluggish year for New York. (This analysis examines deals $10 million and greater.)
Investors spent $15.2 billion on Paris offices in the first nine months of 2019 and for the first time since 2007 more investment came from overseas than from domestic players. In the U.S., San Francisco has overtaken New York as the largest office market. San Francisco’s tech-driven economy has powered the sale of large office buildings this year.
Many of the world’s office markets are showing a retreat in deal volume. However, most are still recording growth in price per unit as the shortage of suitable stock, a lack of forced disposals and plentiful capital means any assets coming to market are attracting good sale prices. The major exceptions are London and Hong Kong, where prices were weaker in the third quarter of 2019 than a year prior.
Additional data analysis by Aamash Haroon
A version of this article first appeared in Global Capital Trends, released November 6. To learn more about the RCA Hedonic Series of cap rate and price-per-unit data sets contact us. If you are an RCA client you can access these data series on TrendTracker and via the Standardized Downloads.
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