real estate investment universe expands in 2020

Real estate investment universe expands in 2020

Wednesday, August 11, 2021

Canada’s real estate investment universe moved up a notch in the global rankings in 2020 as MSCI pegged the inventory of professionally managed real estate held for investment purposes at nearly USD $364 billion (CAD $546 billion), representing a USD $2.9 billion (CAD $3.6 billion) gain in market size from 2019. That places the Canadian market as the seventh largest among the 33 that the Global Property Index producer monitors for its annual report gauging the size of the professionally managed global real estate investment market.

Making way for Canada’s ascendance, the Hong Kong market slipped to eighth following a USD $22-billion loss in market size, trimming it to USD $356.3 billion. It was one of just three markets, along with Brazil and South Africa, on a downward trajectory.

Overall, MSCI estimates global market size grew 9 per cent to reach USD $10.5 trillion in 2020. That’s up from USD $9.6 trillion in 2019. The United States was a significant contributor to that tally, registering a USD $232.5 billion increase in market size over the course of the year. Other strong performers include Germany, Sweden and Switzerland.

“The real estate market’s convincing expansion in the face of the COVID-19 pandemic seems to underscore investors’ resolute search for returns across asset classes,” René Veerman, MSCI’s head of real estate, asserted in his foreword to the recently released report.

Although he attributes some of the value gain to currency fluctuation, he notes 2020’s “subdued” transaction activity and asset value growth — concluding that the growth in market size stems more from new additional investment than dynamics of the pre-existing holdings. Across the global market, asset value fell 1.3 per cent relative to 2019, in contrast to the 2.9 per cent gain in 2019 relative to 2018. Currency movement pushed market size up by 3.9 per cent in 2020 versus just 0.1 per cent in 2019.

Those effects were not felt evenly among the 33 surveyed markets. Canada saw one of the steepest declines in capital growth of any nation — at negative 7.8 per cent — yet still achieved 1.1 per cent asset value growth. Ten markets recorded positive capital growth, led by Norway with a gain of 5.2 per cent. The U.S. recorded negative 2.8 per cent capital growth with 1.2 per cent asset value growth, while the United Kingdom suffered steeper losses, with capital growth at negative 6.5 per cent and more moderate asset value growth at 0.5 per cent.

After the U.S., which alone accounts for a nearly 35 per cent quotient of the global real estate investment universe, the next largest markets are Japan, the United Kingdom, Germany, China and France. The U.S., Canada and Brazil, which together are defined as “the Americas” accounted for nearly 39 per cent of market size in 2020 versus about 35 per cent for nations identified as EMEA (Europe, Middle East and Africa) and 26.5 per cent for Asia-Pacific nations.

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