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Global real estate transaction volumes to surpass US$1trillion by 2020 driven by global ageing population, says JLL

  • ​Cross border activity set to exceed 50% of transactional activity annually in the next five years
  • Investors expected to look towards alternative real estate sectors, M&A and joint ventures as lack of new investment grade supply creates challenges

The global ageing population will drive real estate transaction volumes to surpass US$1 trillion globally by 2020, up from US$700 billion in 2015, according to a new report released today by JLL.

Institutions are also set to increase their market share, which currently sits at 20%, driven by the need to cater for the investment requirements of the ageing global population.

The major influencers in this trend are set to be international investors, with cross-border activity expected to exceed 50% of all investment activity by 2020 to over US$500 billion annually, with the biggest increase coming from capital moving between the regions.

David Green-Morgan, global capital markets research director, JLL, said: "By 2050 there will be more people over the age of 55 than the entire population of the world in 1950. This demographic impact will have a profound effect on real estate investment strategies with the amount of private equity capital targeting direct real estate set to increase by over 500%. Much of this will be driven by increasing institutional allocations looking at higher yielding opportunities."

Real estate investment markets have witnessed several new trends over the last 10 years as the sector has become truly global, helped by the asset class' stable income stream and the attraction of diversified portfolios, lower risk and a hedge against inflation.

The definition of mainstream real estate investment has widened considerably and now includes healthcare, aged care, student housing, residential development, public and private real estate debt and the establishment of a multifamily sector outside of the United States.

"We anticipate that in the absence of significant new stock becoming available, capital will target many different avenues to achieve its desired direct real estate exposure, including joint ventures, partnerships, M&A and other alternative sectors such as healthcare, retirement living and, increasingly, residential," added Green-Morgan.

The alternatives real estate sector has emerged as a bright spot of activity and opportunity in an investment landscape beset by low yields and volatile returns. Allocations have grown rapidly, with 2015 seeing a record-breaking £15bn in transactions in the UK alone – representing around 25% of all commercial real estate investment, up from less than 10% five years ago.