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Global Property Pricing Gains Accelerate as 2021 Ends
2021 concluded with “an explosion of deal activity across the globe,” Real Capital Analytics reports. That in turn led to a rise in pricing that was, if not explosive, certainly accelerated, led by an unlikely front-runner.
Investment volume across the major property types spiked by close to 50% year-over-year, while price growth of office, retail and industrial properties as shown by RCA’s Global Cities Composite Index edged up to 8.8% Y-O-Y. The pace set in the fourth quarter of 2021 was the fastest since the peak of global price growth in 2017.
The 2017 growth occurred “at the tail end of a surge in capital outflows from mainland China and Hong Kong to the rest of the world,” RCA reports. “This time around the global composition of buyers is more domestic, with cross-border activity accounting for only 20% of all global investment.”
The pace of price growth into Q4 was up only marginally from Q3 – rising 10 basis points to 8.8%, RCA says. “This slight acceleration in growth may seem at odds with the frothiness in deal activity but there are a varied set of stories driving prices globally,” according to RCA.
Outpacing all other global markets for pricing gains at year’s end was a city that saw comparatively few blockbuster deals in 2021. “Chicago sets atop the list of global market rankings for price growth in Q4 2021, a position seemingly disconnected from a pace of deal volume still lower than the 2018 levels,” according to RCA.
Looking beyond the topline figure, though, a clearer scenario emerges. “Sometimes price growth happens simply because of the removal of a temporary shock,” RCA says. “Prices had been growing at a slow but steady pace before the pandemic and with some of the worst fears removed, price levels can approach the previous trend.”
For other fast gainers across the globe, the story is not so much about rebounds as it is about strong economic growth or capital flows. Markets such as Sydney, Melbourne and Seoul sit close to the top of the rankings for price growth in 2021, but have also been among the leaders over the past 10 years.
In addition to second-ranked Melbourne, fourth-ranked Seoul and fifth-ranked Sydney, other markets in the top 10 for price growth were Los Angeles in third place, Toronto in sixth place, San Francisco in seventh place, London in eighth place, Singapore in ninth place and Central London in 10th place. “The Global Cities RCA CPPI is a composite index across commercial property types; therefore, a variety of sectors can also help explain price growth,” says RCA.
- ◦Sale/Acquisition
