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Capital flows in the year that was 2014

Andy Schofield

Global investment volumes are reported to be on the rise, for the fifth consecutive year since 2009. Andy Schofield, Director of Research, discusses the increasing share of cross-border interest in Europe.

Broker tallies for investment volumes in 2014 are coming in thick and fast.

Real Capital Analytics reported another rise in global volumes, the fifth consecutive increase since 2009. US and EMEA activity was up over 10%, and Asia-Pacific volumes remained broadly flat (note: RCA figures include hotels and apartments).

One of the key trends since the recovery from the Global Financial Crisis (GFC), has been the rising share of cross-border interest in Europe, and last year proved no exception. The cross-border share of EMEA rose to 46%, still short of the pre-GFC high of 54%. Overseas investors typically account for a fraction in the Americas (c.10%) and 25% of the Asia-Pacific.

Here are a few other facts from last year:

  1. The US were huge investors into Europe, dwarfing the combined cross-border activity of Western European and Middle Eastern investors in their own region. Many were new entrants operating at the upper end of the risk spectrum.
  2. There was barely any influx of capital into the Asia-Pacific region from Western European investors, reflecting significantly higher transaction prices in Asia compared with Europe.
  3. In terms of the top trade routes, China and Hong Kong investors more than doubled their dollar-denominated transactions in the US, reflecting expected regulatory changes. In contrast, Chinese investment into the EMEA region fell by over a quarter.
  4. Paris dominated French activity, accounting for 75% of the country’s total; cross-border investors made up half the total. In fact, seven of the top 15 investors into France were cross-border, and five were new entrants from the US (PIMCO, Colony Capital and Lone Star).
  5. Cross-border investors constituted c.40% of German activity and they showed equal interest in assets located outside of the “Big Seven” markets, offering further evidence of product shortages in core target markets and a willingness to move up the risk curve to achieve higher returns.
  6. UK regional investment out-stripped London for the first year since 2009, mainly in the strength of domestic funds, but again, reflecting a growing interest from overseas. In fact, nine of the top 15 regional investors were from overseas (including Oaktree, Goldman Sachs, Lone Star and Northwood Investors).
  7. Sovereign Wealth investors top the London league table (QIA, KIA and NBIM). London accounted for a massive 71% of all Sovereign Wealth (SWF) Fund European activity and 38% of their global targets.  The influence of SWFs on the rest of Europe is clearly over-stated.

From anecdotal survey evidence, this year is set for more of the same.

Source: Real Capital Analytics, March 2015

 

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Andy Schofield

Andy Schofield

Director of Research

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