Pace of global real estate investment recovery picks up
Dubai, UAE - Global real estate investment volumes declined by 28 per cent year-on-year from a record amount of capital markets activity in 2019. According to JLL’s recently published Global Real Estate Perspective, full-year transaction volumes totalled US$762bn in 2020. In EMEA, investment volumes reached US$282bn, marking a 17 per cent decrease year-on-year.
Global investment volumes were buoyed by strong performance during the fourth quarter, which totalled US$267bn, an increase of 65 per cent from the third quarter of 2020. Fourth quarter global investment activity continued the trend of decelerating quarterly declines throughout 2020 -21 per cent year-on-year in the fourth quarter of 2020 compared to -41 per cent in the third quarter of 2020 and -50 per cent in the second quarter of 2020.
Established markets with sector diversity, transparency and scale fuelled the fourth quarter rebound. France, Germany and the US totalled an aggregate of US$150bn, representing an increase of 81 per cent on the third quarter of 2020, during the final quarter. Gateway markets in Europe and Asia Pacific saw interest pick up in the quarter, where investor demand is improving for centrally-located, larger-ticket assets – particularly core offices.
“As 2020 progressed and the pandemic matured in markets, investors have learnt to better navigate the uncertainty. This confidence was reflected in higher levels of capital deployment in the latter part of the
As 2020 progressed and the pandemic matured in markets, investors have learnt to better navigate the uncertainty
SEAN COGHLAN
year,” said Sean Coghlan, global director, capital markets research & strategy at JLL in a press release.
According to JLL, the improvement in activity was most evident in select segments of the markets.
Capital targeting income and operational stability: The logistics and multifamily sectors continue to exhibit strength globally, with rent collections holding steady and secular tailwinds intact. This dynamic is resulting in more resilient pricing, with winning transaction bids hovering near expectations. The office sector experienced a moderate recovery in investor sentiment in the fourth quarter, with activity expanding in global gateway markets. Private capital has seized on the opportunity to acquire quality office product, representing a near all-time high of 29 per cent of acquisitions valued above US$100mn since the onset of the pandemic. Institutional investors are returning to the market but remain cautious.
Core product seeing expanded liquidity: Desirable longlet, core product represented the largest share of closed transactions in 2020. Prime, high-quality assets have experienced relatively marginal price adjustments since COVID. Pricing for core logistics product continues to hit highs, and high-quality, core multifamily and office product also marked relatively modest, single-digit pricing adjustments since the onset of the pandemic.
“Despite the divergence in many parts of the market, optimism continues to improve on the heels of recovering liquidity, and the low cost of debt is supporting cap rate compression in sectors with growth and favourable demand outlooks. In 2021, we expect this to translate into a broadening of the capital markets recovery,” said Coghlan.