Germany will remain a great target destination for cross-border capital, a ‘real hot spot’, Robert M.White Jr, Founder & President, Real Capital Analytics, said in his keynote address to Real Asset Media’s European Outlook Briefing in New York last week.
‘Going forward, what you learn in textbooks is that capital should flow to the greatest spread so if you look at the long-term range of real estate spreads compared to local 10-year Government bonds it clearly says Germany is going to remain a hot spot and a great target destination for cross-border capital,’ he said.
Next on the list of popular destinations is the US, which because of strong economic growth compared to most other markets ‘will be a rich target similar to Germany,’ White said. ‘That’s as far as I can make predictions for this coming year, considering how volatile the markets have been’.
America has already shown it has ‘added sparkle’, the stats show, as it is the only geography where megadeals increased in 2018 and investment volumes rose both in the year and in Q4. In all other places investment momentum slowed in Q4 across many markets, he said: ‘Japan was a big surprise with 60% decline, Hong Kong which had been on fire really stumbled and it’s too soon to say if it’s a trend or an aberration, the UK had a really significant negative which we expect to continue and even the Netherlands, which also has been one of the most popular markets in Europe, saw a very weak fourth quarter.’
Europe’s share of global capital dropped: it was above 60% in 2017 but it fell to just over 50% last year. Asia Pacific was flat but America saw a big spike to over 30%, especially directed to the US, partly due to the fact that ‘Canadians shifted a lot of their capital from Europe back to the US last year,’ White said. ‘Canadians almost doubled their cross-border investments but most of that was directed to the US rather than Europe’.
So looking at cross-border investment volumes North America dominated, with the US increasing by 3% and Canada up 96%, followed by Germany with +30% and the UK +9% while China, South Korea and the Middle East all fell back significantly, particularly China and Hong Kong which recorded a 60% decline.
‘The Chinese have started selling assets and they are close to being net sellers in the US,’ White said. ‘Many of our clients are certainly looking at old assets held by Chinese investors as potential acquisition targets’.
At a global level cross-border investments continue to rise and have reached a 32% share. London, despite Brexit and other challenges, remains the n1 city in the world for cross-border players, ahead of New York City, Paris, Amsterdam, Los Angeles Metro and Hong Kong.
‘Each of the top ten cities had at least $5 bn of cross-border acquisitions in the past year and looking at the list it’s actually a well distributed group of markets, with four cities in Europe, three in the US and three in Asia’.
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