DTZ today released its latest investment market update for the United
States, covering volumes on a national level in deals greater than $20
million. The analysis focuses on the top eight U.S. markets where
activity reached $89 billion in the period, a 23% increase over the
previous 12 months.
In most cities, cap rates are now close to their 10-year low: at 4.3%,
San Francisco now has the lowest cap rate and close to a ten-year low of
3.7%. DTZ observed similar trends in New York, Boston and Washington,
D.C., while Chicago, Houston and Dallas showed more scope for further
compression.
“Despite a small, 7% quarter-on-quarter fall in activity to $59 billion,
the US market continues its upward trend, reaching a new post-crisis
record of $267 billion, representing a 33% increase on the same period a
year ago,” commented John Wickes, Head of Americas Research at DTZ. “In
the eight key U.S. cities we monitor, volumes rose by 38% over the
quarter, pushing volumes over the past year to 23% higher than the same
period a year ago.” The strongest growth was recorded in Boston, San
Francisco and Los Angeles; Manhattan, while still attracting the highest
volume of capital, was down 3%, which has caused investors to look to
other major centers.
North American investors dominate the U.S. market, acquiring nearly $76
billion of assets in the year to Q2 2014 and representing 84% of market
activity and, on the sell side, reaching net sales of close to $4
billion. However, a steady decline in North American net investment
contrasted with net positive activity from non-North American capital.
“Nearly half (47% or $9.2 billion) of non-North American investment came
from internationally sourced capital, including some U.S.-headquartered
fund managers who raised capital in multiple jurisdictions. More than a
quarter (27%) of the capital targeting the main eight cities originated
from Asia Pacific. China represented the biggest investor by source with
close to $1.6 billion invested, reflecting a similar trend in Europe,"
noted Ed Wlodarczyk, DTZ’s Head of Capital Markets, Americas. “European
capital represented a further $3.3 billion of investment, with Norway
acquiring office properties in Washington, D.C. and San Francisco,” he
added.
Unlisted funds remained the most dominant investors on the buy side,
with $39 billion invested in the past twelve months, and also were heavy
sellers. Listed companies were also acquisitive, at $13 billion invested
over the same period. Of property types, office investments have been by
far the major source of activity, representing two-thirds of investment,
a level typical for the major cities monitored. Since the beginning of
2009, the office sector has typically represented 70% of all deals over
$20 million. Retail was the next largest segment, with $16 billion
invested, representing 18% of investment activity. Industrial assets
represented a further 12% or $10 billion of investment.
The strong weight of capital has pushed office cap rates to near
ten-year lows. “Looking ahead, we see US volumes and prices rising
further. With a new record of nearly USD $150 billion of new capital
targeting the US markets, investors will need to move up the risk curve
to achieve the same returns,” said Nigel Almond, Head of Capital Markets
Research at DTZ. “Relative value, as measured by our Fair Value Index
remains good for the moment, due to low government bond yields. Time
might be running out for investors to take advantage, as bond yields are
expected to increase in the next few years,” he added.
About DTZ
DTZ, a UGL company, is a global leader in property services. We provide
occupiers and investors around the world with industry leading,
end-to-end property solutions comprised of leasing agency and brokerage,
integrated property and facilities management, capital markets,
investment and asset management, valuation, building consultancy and
project management. In addition, our award winning research and
consulting services provide our clients with global and local market
knowledge, forecasting and trend analysis to make the best long-term
decisions for their continuous success far into the future. DTZ has
47,000 employees including sub-contractors, operating across 208 offices
in 52 countries. For further information, visit: www.dtz.com.
About UGL Limited ABN 85 009 180 287
UGL Limited (ASX: UGL) is a global leader in outsourced engineering,
property services and asset management and maintenance delivering
essential services that sustain and enhance the environment in which we
live. UGL comprises three business units including Engineering,
Operations & Maintenance and Property providing services across the
power, water, rail, resources, transport, communications, defence and
property sectors. Headquartered in Sydney, Australia, UGL operates
worldwide across 52 countries employing over 56,000 people. For more
information, visit: www.ugllimited.com.
Copyright Business Wire 2014