Exploring Shifts in the Global Commercial Real Estate Landscape.
MSCI Real Assets recently released a comprehensive report, “How Big Is the Global Real Estate Market?” shedding light on transformations within the world of professionally-managed real estate throughout 2022. Amidst rising interest rates, a strengthening U.S. dollar, and economic uncertainties, the global commercial real estate investment sphere faced new challenges. Despite these factors, certain markets demonstrated resilience. Key insights from the report include:
- The global professionally-managed commercial real estate market contracted by 4.1% from 2021 to 2022, settling at $13.3 trillion.
- The Americas experienced a 0.6% growth, reaching $5.9 trillion, while the EMEA market contracted by 9.8% to $4.1 trillion, and the APAC market reduced by 4.6% to $3.4 trillion. Currency strength, notably the robust U.S. dollar, played a significant role in this shift.
- Presently, the Americas command the largest share of the global market at 43.9%, followed by EMEA at 30.4% and APAC at 25.7%.
- The U.S. maintains its leading position, contributing $5.3 trillion or 40.3% to the global professionally-managed real estate landscape. However, growth in 2022 slowed to $90 billion, a stark contrast to 2021. Only five markets, including Australia, South Korea, Ireland, and Slovakia, exhibited growth during the year.
- The U.K. and Japan, both prominent players, witnessed declines of $132 billion and $96 billion, respectively, in their real estate markets.
- Examining ownership structures, MSCI found that in the Americas, private (unlisted) real estate portfolios dominated at 39.8%, followed by listed portfolios at 32.8%, directly owned assets at 12.9%, and “other and unknown” holdings at 14.5%. In contrast, the APAC region saw listed portfolios accounting for over half the market at 54.3%.
- Transparency, gauged by JLL’s Global Real Estate Transparency Index, correlated with a country’s real estate market weight globally. Countries ranking high in transparency, such as the U.S., the U.K., France, Australia, and Canada, also boasted some of the most substantial professionally-managed real estate markets.
- Globally, commercial real estate acquisitions dipped by 20% YoY in 2022. The ratio of this decline to market size reached 8.7%, compared to 10.0% in 2021. Noteworthy ratios were observed in Slovakia (19.6%), South Korea (14.9%), Ireland (13.5%), Poland (13.0%), and the U.S. (11.7%).
Rene Veerman, Head of Real Assets at MSCI, highlighted the non-uniform impact of transactional declines on valuations across markets, with the U.K. leading adjustments followed by continental Europe, while the U.S. and Asia Pacific displayed resilience until recent signs of connection .