Global real estate investment market swells 8.5% in 2021; China now 4th largest: MSCI

THE professionally managed global real estate investment market grew 8.5 per cent to US$11.4 trillion in 2021 from US$10.5 trillion in 2020, led by a property rally in US and China.

According to the latest MSCI Real Estate Market Size Report published on Wednesday (Jul 27), US and China accounted for about 60 per cent of the real estate market growth in 2021.

The largest change came from the US, whose market size gained US$466.3 billion to US$4.12 trillion, while China came in second, growing by US$123 billion to US$791 billion.

Taking into account the new expansion in market value, China is now the fourth-largest real estate market in the world, overtaking Germany, but still behind US, UK and Japan.

Globally, the largest driver of market size was asset value growth — contributing 9.2 per cent for standing investments.

Currency, on the other hand, had a moderating impact on growth after leading a 3.1 per cent decline in market size in 2021. This was largely due to a strengthening of the US dollar against the majority of other international currencies.

A NEWSLETTER FOR YOU

Tuesday, 12 pm

Property Insights

Get an exclusive analysis of real estate and property news in Singapore and beyond.

Sign Up

The total value of completed transactions fulfilled by investors in 2021 also stood at a whopping US$2.10 trillion — a figure that may come as a surprise to those who expected a decline in real estate pricing following a series of lockdowns worldwide.

“Growth in prices has persisted even as property types such as offices and retail face headwinds in a world reshaped by the pandemic,” said René Veerman, head of real assets, MSCI.

Assets benefitting from long-term structural tailwinds, such as logistics and residentials, have soared, said Veerman, boosted by the increased propensity to shop online and the jump in the cost of buying homes.

The report, which categorised the real estate portfolios broadly into asset owner, unlisted, listed, and other and unknown, also found that the unlisted real estate market had grown the most in 2021.

It rose by 13.8 per cent over its market value in 2020, outshining its listed peers, although the latter’s market size remains the largest with a value of US$4.5 trillion. The market size for unlisted real estate stood at US$3.7 trillion.

“Investors have become even more strategic about their investment choices and we’re also seeing them explore new sectors such as data centres and life sciences – a pandemic-era discovery for many,” said Veerman.

“The downside of such changes of strategic focus is that investors have largely dropped retail - traditionally one of the biggest commercial property sectors - from their shopping lists and replaced it with sectors that are either overly subscribed or minuscule in scale.”

Possessing data on the size and structure of the market and of the wider opportunity set, particularly in new property types, is vital to enable managers to raise capital for strategies they can implement, Veerman opined.

MSCI’s 2021 market size study includes 37 markets – 3 from Americas, 23 from Europe, Middle East and Africa and 11 from Asia Pacific. Started in 2004, the annual report estimates the size of the professionally managed global real estate investment market and aims to provide insights into the coverage of MSCI’s direct property indexes.