A new report from real estate data firm MSCI Real Assets, “How Big Is the Global Real Estate Market?” looks at how the global professionally-managed real estate market changed over the course of 2022. As could be expected, rising interest rates, a strengthening U.S. dollar and a more uncertain economic environment combined to present some new challenges for the global commercial real estate investment universe. Nevertheless, some of the markets MSCI looked at continued to see growth even under these conditions. Here are some takeaways from the report:
- The size of global professionally-managed commercial real estate market declined by 4.1% between 2021 and 2022, to $13.3 trillion.
- During the same period, the size of the real estate market in the Americas grew by 0.6%, to $5.9 trillion, while the size of the market in Europe, Middle East and Africa (EMEA) shrank by 9.8% to $4.1 trillion and the Asia Pacific (APAC) market shrank by 4.6% to $3.4 trillion. A significant part of that dynamic was driven by the strength of the U.S. dollar compared to other currencies, which hit particularly hard in Sweden, Norway, the U.K. and Japan.
- Currently, Americas accounts for the largest share of the professionally-managed global commercial real estate market, or 43.9%, followed by EMEA at 30.4% and APAC at 25.7%.
- The U.S. topped the list of the largest real estate markets in the world, at roughly $5.3 trillion or 40.3% of the global professionally-managed real estate universe, though it saw growth of only $90 billion in 2022, several times lower than in 2021. It was one of only five markets in MSCI’s tally that showed any growth during the year. The others were Australia, with $9 billion, South Korea, with $20 billion, Ireland, with $4 billion, and Slovakia, with $1 billion.
- In contrast, the U.K. real estate market saw a drop of $132 billion in value during the year, and Japan’s real estate market lost $96 billion in value. Both countries rank in the top four professionally-managed real estate markets globally.
- Drilling down further to look at real estate ownership structures in each region, MSCI found that in the Americas private (unlisted) real estate portfolios accounted for the largest portion of the market, at 39.8%, followed by listed portfolios at 32.8%, directly owned assets at 12.9% and 14.5% attributed to “other and unknown” types of holdings. The breakdown was somewhat similar in the EMEA, but differed significantly in the APAC region, where listed portfolios accounted for more than half of the market at 54.3%, while unlisted portfolios accounted for just 23.0%.
- The firm also looked at how transparency, as measured by JLL’s Global Real Estate Transparency Index, correlated with the weight of a country’s real estate market in the global system. It found that countries high in the transparency rankings—the U.S., the U.K, France, Australia and Canada, for example, among those at the top—also had some of the highest weighted markets for professionally-managed real estate.
- MSCI found that, globally, commercial real estate acquisitions fell by 20% year-over-year in 2022. When the firm’s researchers compared the decline in transaction volume to market size, they found that globally the resulting ratio reached 8.7% vs. 10.0% in 2021. By country, the ratio was the highest in Slovakia, at 19.6%, South Korea, at 14.9%, Ireland, at 13.5%, and Poland, at 13.0%. In the U.S., it was 11.7%. According to a note from Rene Veerman, head of real assets with MSCI, while widespread declines in transaction activity have impacted valuations in a number of markets, that effect has not been uniform. “The U.K. led the price adjustment, followed by continental Europe, but the U.S. and Asia Pacific, particularly, have lagged. And only now 12 months after the first signs of a correction in transactional activity are we seeing the first signs of valuation modifications in Asia Pacific,” he wrote.
MSCI analyzed a total of 37 markets for the report. All of its comparisons to estimates of market size in previous years were based on a history-adjusted basis.