Global Real Estate Industry
The global real estate management and development industry (a sub-part of the financial services industry) grew at a yearly rate of 0.3% between 2010 and 2015, according to MarketLine. The industry is expected to reach in excess of $465 billion by 2015.
Residential activity led market growth in 2010, generating over $262 billion in profit, which represented 60% of the overall market. Yearly growth in the four-year period ending 2010 was at a rate of -0.9%, totaling just over $461 billion in 2010.
Commercial Real Estate Market Research
The next five-year period will see demand for commercial real estate rebound, following a dip caused by the credit crisis. During the crisis, demand in developing markets, such as India and China, helped to make up for lower demand in developed countries. Improving economic conditions in emerging markets due to increased construction activity and lower unemployment will continue to contribute to the global commercial real estate market. The industry buys, rents, sells and manages (proprety management) both leased and privately owned real estate, including non-residential building and apartment buildings. Other related services include property appraisal, brokerage and property development.
The US commercial real estate market (which also includes the industrial real estate business) is estimated to be worth more than $4.5 trillion. Long-term investors, brokers and estate developers hold as much as 90% of the overall market. The public market represents almost $23.5 trillion, while the private market is worth just over $17 trillion. The public market is comprised of almost 59% debt, over 40% equities, and less than 1% real estate. The private market is made up of over 65% debt, 28% real estate, and under 7% equities.
Residential Real Estate Market
Worldwide demand for new housing is expected to expand by 3% yearly through 2014, with almost 55 million new housing units to be constructed, according to Freedonia. The 2009 recession caused housing construction to fall off in Western Europe, Japan and North America. As the construction industry rebounds, these regions will lead market growth through 2014. Africa-Mideast will show the fastest rate of emerging nation growth at close to 4%, with the construction of 11 million units. Asia-Pacific will lead in terms of volume, with almost 32 million new units representing 2% yearly growth through 2014.
Global housing stock will increase at a yearly rate of almost 2%, from a base of almost 2 billion units in 2009. Asia-Pacific held the largest share of housing stock at almost 1 billion units, or over half of the global total, with China accounting for almost a quarter of the overall total. China was followed by Africa-Mideast, which held over 290 million units of the world’s housing stock in 2009, 15% of the overall total, and Western Europe and North America representing under 20% of the world’s housing stock. The global growth rate is expected to settle at just under 2% yearly through 2014 to over 2 billion units.
The Chinese residential property market is expected to grow 13% yearly between 2012 and 2015, according to RNCOS. The market will be driven by a high degree of urbanization, following continued recovery after the economic crisis, aided by government spending in the sector and rising demand. The market will equally benefit from state measures to limit climbing domestic real estate prices as the government seeks to expand affordable housing.
All types of property and all regions in the global real estate market are in recovery, according to the Rosenberg Real Estate Equity Funds (RREEF) 2011 global real estate investment market outlook. The market is predicted to see continued recovery in 2011 and 2012, and to grow in most sectors from 2013.
Moving forward, the main industry trends will come from urbanization in developing countries and an ageing global population. The rate of urbanization in emerging economies is rising as a traditionally rural workforce moves to cities in search of employment and higher levels of education leads to a shift in employment towards offices. While certain countries, such as the US, will limit the impact of aging demographics through immigration and a bigger younger generation, other developed countries will see rising numbers of retired people, which will impact the number of people working in offices, housing trends and the level of discretionary spending, which will in turn impact warehouses and retail spaces.
RREEF predicts the global rate of return on real estate will average at between 8% and 11% from 2011 and 2015. Performance and risk will be high in the Asia-Pacific region, while the US will show average returns at lower financial risk. The EU is expected to fall behind the global rate of return with slow growth and moderate risk.