Pace of real estate investment recovery picks up

Promising trend: Strong fourth quarter 2020 performance moderated the full-year investment decline

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 $762 billion in 2020.
In EMEA, investment volumes reached $282 billion, marking a 17 per cent decrease year-on-year.
Global investment volumes were buoyed by strong performance during the fourth quarter, which totalled $267 billion, an increase of 65 per cent from Q3 2020.
Fourth quarter global investment activity continued the trend of decelerating quarterly declines throughout 2020 — 21 per cent year-on-year in Q4 2020 compared to — 41 per cent in Q3 2020 and — 50 per cent in Q2 2020. Established markets with sector diversity, transparency and scale fuelled the fourth quarter rebound. France, Germany and the US totalled an aggregate of $150 billion, representing an increase of 81 per cent on Q3 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 learned to better navigate the uncertainty. This confidence was reflected in higher levels of capital deployment in the latter part of the year,” says Sean Coghlan, Global Director, Capital Markets Research & Strategy, JLL.
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 $100 million since the onset of the pandemic. Institutional investors are returning to the market but remain cautious.
Core product seeing expanded liquidity: Desirable long-let, core product represented the largest share of closed transactions in 2020. Prime, high-quality assets have experienced relatively marginal price adjustments since COVID.