Last year, the global market for professionally managed, investment-grade real estate grew at nearly twice the rate of the year before, according to a report from New York-based research firm MSCI.
The index specialist estimates the value of property owned for the express purpose of achieving investment returns hit $9.8 trillion in 2019, a 7.8 percent increase on 2018. By MSCI’s count, the global market had grown at a rate of 4.1 percent in 2018, closing at $8.9 trillion.
Of the 32 countries where MSCI identified professionally managed real estate, five drove the lion’s share of growth last year. With a $450 billion increase between 2018 and 2019, the US, China, the UK, Germany and Japan accounted for roughly two-thirds of growth last year.
The US alone made up more than 40 percent of the growth with $272 billion of additional real estate value. China, however, grew at a faster overall rate, increasing its real estate share by 9.6 percent year-on-year compared with the US’s 8.6 percent.
Similarly, the US market made up 41.3 percent of the global total last year with more than $3.4 trillion. Japan was a distant second at $880 billion followed by the UK at $745 billion. For the second year in a row, China had the fourth highest total at $592 billion, bumping Germany into fifth place.
Although both the UK and Japan still hold a significant advantage over fast-growing China, they saw their shares of the global market fall last year by 28 and 16 basis points, respectively. France also saw a notable dip in its market share, which fell nearly a quarter of a percent. Conversely, Canada, Australia, Switzerland and the Netherlands increased their relative exposures.
Though small in relative size, Hong Kong and Singapore led the pack in another category analyzed by MSCI. The two single-city markets had the highest real estate value per capita, with Hong Kong topping the chart at $51,183 per resident and Singapore at $31,354. Switzerland was a close third at $31,287 per person.
All the real estate values tracked by MSCI were converted to US dollar denominations, so exchange rates played a small role in the final calculation. Although some prominent real estate markets, such as Canada, the UK and Japan, all saw their currencies appreciate relative to the US dollar, those were largely offset by depreciation in China and throughout the eurozone. In total, currency had a net positive impact of 0.1 percent compared with a negative impact of 2.6 percent the year prior.
MSCI’s calculation is based on its Global Annual Property Index – which touches on the 25 most developed countries for real estate investment – as well as seven developing Asian markets: China, Hong Kong, Singapore, Thailand, Taiwan, Indonesia and Malaysia. The index covered $2.2 trillion of professionally owned real estate last year, with its final projection based on an estimated global coverage ratio of 23.2 percent.