Real Estate: Footloose Money Chasing Cross-Border Deals

Savills, a global real estate services provider listed on the London Stock Exchange, has released its annual report on the role that real property plays in the investment world. Here are some of its key points:

Real estate assets constitute 60% of the value of all assets worldwide;

Residential real estate constitutes 75% of the value of the world’s real estate – the remainder is about evenly split between commercial and agricultural uses;

Of the world’s high-quality commercial real estate, 45% is in North America;

Cross-border activity in real estate has grown since the global financial crisis of 2008 – in this connection the author of the report, Yolande Barnes, says, “Money is becoming not only footloose but also more adventurous”;

The last three years have seen a steady growth in the volume of trade in real estate.

To expand on that last point a bit, the report says that volume has grown by 62% in North America during this period and by 65% in EMEA; the rate of growth in Asia Pacific has been somewhat more subdued, at 18%.

Population versus Value

The value of all developed real estate in the world, by Savills’ count, in U.S. dollars, is $217 trillion. This is 2.7 times the world’s gross domestic product.

Perhaps counter to Malthusian intuitions, there is no very close relationship between the percentage of the globe’s total human population to be found in a given region and the percentage of total residential real estate value there. Asia and the Pacific have 37% of the former but only 20% of the latter. There is another such disparity from the other side in North America, which represents only 5% of the globe’s population, but lives in 21% of its residential real estate by value (and shops/works etc. within 45% of the world’s commercial real estate by value as noted above.)

In Europe, too, there is a big gap between the population numbers and the value numbers. It represents 11% of the world’s population, 24% of residential value, 28% of commercial value.