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Global office investment hits a record USD 130 billion in Q4 2021

Article-Global office investment hits a record USD 130 billion in Q4 2021

Investment Analysis
After a strong 2021 last year, the global office investment sector is facing some pressure but according to real estate consultant, Savills strong fundamentals in key global cities are favourable and are helping to maintain volumes.

According to Savills’ Global Capital Markets Quarterly update, pressure from the macro-economic environment has put pressure on global office investment but strong fundamentals should keep investment yields stable in many key markets, including Dubai, Paris, London, Sydney, and Mumbai.

Overall, the recovery in occupier demand and a shortage of prime office stock across most major markets has encouraged greater investor activity says the real estate consultant, with global investment in offices hitting a record of USD 130 billion in the final quarter of 2021, with momentum spilling into the beginning of this year.


Looking at leasing activity across Dubai, Edward Price, Associate Director, Capital Markets Middle East at Savills says that the emirate has remained strong over the last six months. In addition, Price says that the number of enquiries has gradually increased, and the city has benefited from the availability of Grade A space at affordable cost compared to other office hubs across EMEA.

Looking at European investors, Savills says that they may continue to benefit from solid occupier demand and a lack of supply in the prime and core segments of the market, keeping yields stable.

“The office market in Dubai remains an attractive investment opportunity with estimated cash-on-cash prime office yields over 8%, second only to Mumbai and highest among the western and Asian countries ranked,” says Price.

Over the next year, Savills has forecasted that the likely interplay between the top-down (inflation, interest rate rises, geopolitical uncertainty) and bottom-up factors (limited availability of stock and weight of money causing competition between investors) will determine the pricing of office assets in major global cities.


Savills analysis of the United States is that while the country may be most exposed to macro top-down factors, there are expectations of a significant tightening in financial conditions and limited pricing power for landlords potentially leading to yields rising in New York and Los Angeles.


Domestic market-specific characteristics dominate the regional narrative in Asia, reveals Savills. “Tokyo for example, cash-on-cash returns will remain attractive given little upward pressure on interest rates, which will support further yield compression, while the outlook for Shanghai has deteriorated amid a challenging domestic economic backdrop,” reveals Savills.

Looking ahead for global investment, increased uncertainty will underpin a flight to safety which, combined with an increasing focus on ESG, will favour Grade A office buildings in major cities, concludes Savills.


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