Global Commercial Real Estate Market: $6.1 Trillion Industry by 2018

Posted on July 15, 2014

The Global Commercial Real Estate market is deeply integrated with the world economy at large. The industry includes construction, real estate brokerage, valuation, sales, management, consulting and appraisal. It is driven by macroeconomic trends and shifts mostly among developed nations with dense and valuable urban areas that include a large volume of office space and multifamily residential buildings. More specifically, the commercial real estate (CRE) markets in each country or region are determined by office vacancy rates, property values, prevailing interest rates and unemployment levels.

The global recession caused notable contraction in the industry in 2009, as unemployment rose and property values fell in key mature markets like the United States, Europe and Japan. The European sovereign debt crisis has slowed investment in several member states and hampered more energetic economic growth in more stable countries like Germany and France. During the credit crunch, financing became severely constrained, and real estate transaction volumes and new construction contracted sharply. These trends have led to marginal industry growth in the five years to 2013; during this time, industry revenue is expected to grow at an annualized rate of 0.4% to $5.3 trillion.

Since then, central banks across the globe have helped stimulate economic recovery and rekindle investment into the real estate sector by curbing interest rates. Booming commercial real estate activity in Asia (particularly in China) has also helped to offset industry declines. China┬┤s fast-growing population, economy and consumer base have triggered construction of shopping centers, hotels, apartment buildings and industrial spaces at an accelerated rate. The stabilization of mature markets in the United States, Japan and Germany has anchored this growth. As a result, industry revenue is expected to grow a solid 2.9% in 2013.

During the five years to 2018, industry revenue is forecast to maintain this pace with annualized growth of 2.8% to reach $6.1 trillion. Expanding business and retail operations will drive industry growth, as unemployment declines in mature markets and consumer disposable income and corporate profit improve in developing economies. While the slow growth of Europe and Japan will limit more rapid increases in industry revenue, the global CRE market will shift more and more toward China and India, where consistent growth will be found throughout the coming years.