Investment in malls, office buildings and warehouses worldwide could fall 30 percent this year as higher borrowing costs and the slide in property values in Europe and the US deter potential buyers, DTZ Group PLC said.
Investment in commercial real estate will likely drop to US$500 billion from about US$700 billion last year, the London-based broker said in its Money Into Property report.
The prospect of slowing rental growth may deter investment in the UK and the US, while in the rest of Europe asset values are set for further declines, DTZ said.
“This is likely to be reflected in a significant further slowing in the estimated growth in capital flows,” DTZ said in the report. There may be a “relatively modest pickup” in the second half.
A survey of 180 investors conducted in March and April showed 62 percent planned to allocate more money to real estate, less than the 78 percent last year, the DTZ report said.
Investors in Europe and the Asia-Pacific regions were more optimistic than Americans, less than half of whom plan to increase their property holdings.
Fifty-six percent of investors plan to spend more in the Asia-Pacific region, favoring investment in development ventures. The most popular countries include China and emerging markets such as Vietnam and Indonesia.
US-based investors are reducing their exposure to Europe in favor of Asia-Pacific countries, while European pension funds may allocate as much as 30 percent of their assets to real estate in the region, DTZ said.
European and US investors face lower standards of transparency and regulatory difficulties in the Asia-Pacific region and “are likely to face increasingly strong competition from domestic players as the markets grow in sophistication,” the DTZ report said.
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