The global property market has experienced a significant downturn due to the credit crunch and economic uncertainty, resulting in a 46% decrease in transaction volumes during the first quarter of 2008, according to a recent property report. Despite this global decline, investment across Asia and other emerging markets has continued its upward trajectory. Global sales of major commercial properties reached $154 billion in the first quarter, a substantial drop from the $283 billion recorded during the same period in 2007, as reported by New York-based Real Capital Analytics.
Property sales data for April and preliminary May figures reveal a weakening in Asian markets and a more pronounced decline in sales across the United States and Europe. The United Kingdom has taken the lead in price reductions, followed closely by the US. Since September, initial yield on commercial property acquisitions has seen an uptick—over 25 basis points in the Americas and nearly 40 in Europe. However, cap rates throughout Asia have continued their downward trend, reflecting both the influx of capital and the anticipated growth potential of its emerging economies.
Acquisition of land and development rights across the Asian landscape has reached almost $29 billion this year, solidifying its standing as the primary investment target thus far. European office properties have taken a distant second place, with transactions just under $20 billion. Office properties in the Americas and Asia trail closely behind, each recording between $15 billion and $16 billion in transactions through April. Not only has developable land in Asia witnessed the most significant growth in transaction activity, but it has also experienced the most substantial price increases during the first quarter. In fact, all other property categories excluding apartments in Asia recorded gains in both transaction volume and pricing. Contrastingly, European property types saw price decreases across the board, though some categories did experience an increase in volume. In the Americas, however, no property type demonstrated a higher sales volume, though average prices in the industrial, retail, and hotel sectors registered a slight increase. Sellers, notably in the U.S., have generally resisted selling at decreased prices, causing substantial declines in volume. Meanwhile, the prices for those few successfully completed transactions show some level of resilience. Despite this, land prices within the US are declining rapidly and have experienced the sharpest decrease in value throughout the year so far.