Real Estate Market Size 2016
categories: Indexes, Americas, EMEAI, Asset Allocation and Asset Liability Management, Investing (Investment Management), Performance Analysis, Portfolio Construction and Optimization, Risk Management, Asia Pacific, Asset Owners, Alternatives, Hedge Funds, Australia, Fixed Income, Multi-Asset Class, Real Estate Indexes, Research Paper, Real Estate, TEUBEN Bert, Asset Managers (Quant or Fundamental), Banks, MCELREATH Brent, HARIHARAN G G, Real Estate Products & Services
MSCI began systematically estimating the size of professionally managed real estate investment markets in 2004. These estimates are fundamental to the creation of the IPD Global Annual Property Index and a range of other multinational indexes and benchmarks, and they provide insights into the coverage of MSCI’s direct property indexes. This paper sets out the 2016 market size estimates and explains the main changes between 2015 and 2016.
- Global market size rose in 2016. The size of the professionally managed global real estate investment market grew marginally from $7.1 trillion in 2015 to $7.4 trillion in 2016.
- Currency movements distorted national changes. Currency movements effectively reduced the size of the global real estate investment market by approximately 2.3% in U.S. dollar (USD) terms. In contrast, capital value growth and new developments in the market, such as new construction and sale & leaseback transactions, were the main contributors to the growth in market size.
- The U.S. weighting climbed again. The relative weight of the U.S. increased within the IPD® Global Annual Property Index in 2016, for the seventh consecutive year. The higher weighting of the U.S. in the index resulted from capital growth, new developments and other capital expenditure, as well as continued depreciation of many currencies against the U.S. dollar.
- Japan overtook the U.K. for second spot. Japan has once again become the second biggest market, overtaking the U.K., which had been the second biggest market in the previous two years (2014 and 2015); this was mainly due to the U.K. currency’s depreciation in 2016.
- Capital value growth pulled up global markets. Capital value growth in local currencies in both the U.S. (2.6%) and Japan (2.7%) surpassed the global average of 2.5% in 2016, based on the IPD Global Annual Property Index. However the U.K., the third largest market in 2016, had a negative capital value growth of -0.8%.