The global real estate market is set to grow by 40 percent over the next five years, from $9.8 trillion (€7.1 trillion) in 2006 to an estimated $13.7 trillion in 2011, according to findings by RREEF, the property investment arm of Deutsche Bank.
According to the report, the US market is expected to grow by $1.5 trillion over the next five years, the European market by $1.1 trillion, and the Asia-Pacific market by $1.3 trillion.
Emerging markets will experience strong growth of more than 100 percent, but their scale will remain relatively small. By 2011, emerging markets are likely to have grown by $1.7 billion but will still only represent 13 percent of the global total. North America and Western Europe could represent as much as 70 percent.
According to RREEF’s findings, the value of the total invested commercial market—the space owned by professional real estate investors—was estimated to be close to $10 trillion at the end of 2006. The investible market, which also includes space that is currently owner-occupied but may in time become institutional, totals $16 trillion.
The share of invested stock varies by country due to different levels of maturity. US invested stock dominates the global real estate market, at 48 percent of the total, followed by Europe at 33 percent, and Asia at 19 percent. The US also accounts for more than a third of the global investible stock, followed by Japan, Germany and the UK.
While the global property market may be growing, the report concludes overall performance is leveling off.
“With rental growth moving towards a cyclical peak and with less scope for further cap rate compression, the performance of the real estate markets is set to fall off over the coming five years,” the report said. “Certain markets are likely to experience significant cyclical downturns as investors realize that current levels of pricing are unsustainable given the surge of new supply and the prospect of weaker, or even negative, rental growth.”
The fastest pace of growth is expected to be in the emerging countries of Asia, Eastern Europe and Latin America, but the more significant increases in overall value will continue to be in the mature markets of North America, Western Europe and Japan, according to the report.