It takes two to tango. This lower pace of sale volume was not just due to potential buyers underwriting worst-case scenarios on every potential acquisition. Property owners have been loath to sell and lock in losses by matching the underwriting of potential buyers in the current market. This disconnect cements the reduced level of investment activity. (View Highlight)
Real estate is the box where the economy lives. Everything produced, sold or managed must happen somewhere. Even clicks on the internet drive demand for data centers. Growth in the global economy pushes demand for more real estate, yet in our annual study of the size of the global commercial-real-estate market, we show that the value of the market fell in 2023 despite such economic growth. (View Highlight)
here is room for money to be made in a down market, however. A disconnect on valuations presents an opportunity for investors to solve problems tied to the repricing of assets. In response to rising financing costs, new investment vehicles aimed at providing rescue capital are emerging. Clients have been clamoring for MSCI information on the debt markets so that they can objectively price these opportunities. (View Highlight)
Commercial-real-estate prices began to face downward pressure in 2022 as interest-rate spikes hurt the value of property income. Even asset classes like logistics properties registered declines in pricing despite growth in income. Combine financing challenges with ongoing shocks to property income for the office and retail sectors from the ripples of the COVID-19 crisis, and asset values have fallen from peak levels. (View Highlight)
These moves in the pricing of commercial real estate have come through at a glacial pace in comparison to other asset classes.
Publicly traded real-estate vehicles, for instance, repriced quickly in 2022 in response to the interest-rate shocks. Many investors are not convinced that the pricing of individual assets has fully incorporated all the risks tied up in the rate increases, and deal activity has fallen to near-record lows as a result. Indeed, sales of properties out of the portfolios that contribute to the MSCI Global Property Annual Property Index reached a 19-year low in 2023. (View Highlight)
At 29%, offices represented the largest share of the global professionally managed real-estate market, followed by the residential sector at 22% and the retail and industrial sectors at 19% and 18%, respectively. (View Highlight)
The world’s largest market shrank by USD 410 billion in 2023 to USD 4.9 trillion amid continued pressure from higher interest rates and uncertainty on pricing. The weight of the U.S. in the global market size fell to 37.5% from 40.3% in 2022. (View Highlight)
The size of the professionally managed global real- estate investment market was USD 13.2 trillion in 2023, falling slightly from USD 13.3 trillion in 2022. (View Highlight)
The U.K. moved up to the third position while Japan slipped to the fourth position owing to the strengthening of the pound and the weakening of the yen versus the U.S. dollar. (View Highlight)
Residential constituted 29% of the market size of the Americas, while in Asia-Pacific (APAC) and Europe, the Middle East and Africa (EMEA), office was the largest sector, representing 36% and 33% of the market size, respectively. (View Highlight)
The size of the professionally managed global real- estate investment market decreased by 0.9% to USD 13.2 trillion in 2023 from USD 13.3 trillion in 2022. This decline was moderate compared to the decline seen in 2022 when the year-over-year drop was 4.2%.
This analysis includes 37 markets — three from the Americas, 23 from EMEA and 11 from APAC. The Americas contributed 41.5% of the global market size in 2023, while EMEA and APAC contributed 31.8% and 26.8%, respectively.
The market size of the Americas declined by 6.4% to USD 5.5 trillion in 2023, while EMEA’s size increased by 3.5% to USD 4.2 trillion and APAC’s size rose by 3.1% to USD 3.5 trillion. The increase in market size for EMEA and APAC was primarily driven by the strengthening of local currencies relative to the U.S. dollar. (View Highlight)
Globally, the office sector continued to dominate the professionally managed market in 2023, despite well-publicized structural challenges, and constituted 29%. Residential was the second-largest sector globally, representing 22% of the total assets under management (AUM). The retail and industrial sectors constituted 19% and 18%, respectively, while hotel and healthcare together represented 8% of the global AUM. (View Highlight)
The U.S. contributed more than half of the global residential AUM. Residential was the largest sector in the U.S., constituting 28% of the market’s AUM. Residential was also the dominant sector in Switzerland, Finland and Denmark.
• Retail was the largest sector in APAC after offices. Four out of the 11 APAC markets had retail AUM of more than USD 100 billion. China had the second-largest retail market size globally after the U.S.
• Of the four largest sectors, retail had the lowest concentration of AUM in the top five markets, at 58.7%. Residential was the most concentrated in the top five markets, at more than 75% of global AUM for the sector. • In smaller markets such as the Czech Republic, New Zealand and Poland, industrial was the most dominant sector, while in markets such as Switzerland and Hong Kong, the industrial sector represented less than 10% of the market size. • The hotel and healthcare sectors together constituted only 8% of the global AUM.
They were heavily tilted to the U.S., which represented 44% of hotel and 53% of healthcare at the global level. (View Highlight)
The portfolios in this analysis are divided into four categories — asset owner, unlisted, listed and other and undisclosed. (Details on the categories are available in Appendix II.) Listed and unlisted real-estate market are the two largest categories, with a total market size of USD 4.9 trillion and USD 5.2 trillion, respectively. (View Highlight)
we show the composition of the different portfolio types by region in 2023. Unlisted real estate represented the largest share of the market-size estimate for the Americas and for EMEA, at 47% and 45%, respectively. In APAC, listed real estate represented the largest share, at 58%. (View Highlight)
