A Bird's Eye View Global Real Estate Markets: 2009 Update

Global commercial real estate asset values are undergoing a correction in that will create risks and opportunities for investors everywhere, as the global economy and financial markets adapt to a lowerleverage world.

Executive Summary
The ongoing global recession and financial market turmoil have taken a big toll on asset values and investment flows around the world, particularly in developing nations. According to the Institute of International Finance, private capital flows to emerging markets rose to a record 9 billion in 2007 before dropping by about half in 2008, and the Institute estimates that that number will fall to 5 billion in 2009. Commercial property values are under pressure globally and many markets have already experienced significant declines in both asset values and investment activity. Yet investors continue to be interested in cross-border real estate, despite the recent resurgence in risk aversion and probable increase in risk premiums that has dampened enthusiasm for emerging markets. Many investors are looking to take advantage of distress in the property markets by focusing on a much broader set of potential markets to find the best risk-adjusted opportunities.

That property investors have expanded the opportunity set to include foreign and domestic investments is not surprising. Cross-border investing has become much more common in recent years for a host of reasons, and the truly global nature of the current downturn will create opportunities in markets across all regions. But to be successful, investors need timely and meaningful information as a basis for making decisions about where and when to invest. With that in mind, this report updates our 2003 estimates of the size of the commercial real estate markets in developed and emerging countries using a GDP-based approach, taking into consideration the current slowdown in the global economy. (For the original report, see “A Bird’s Eye View of Global Real Estate Markets,” Pramerica Real Estate Investors, March 2003). The updated analysis also extends the study to a larger universe of countries and includes projections of market size over the next 20 years to give investors a better understanding of where growth is likely to be strongest.

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  Global Real Estate Markets March 2009A Birds Eye View of Global Real Estate Markets Mar2009.pdf265 Kb