Despite first-quarter global commercial real estate investment volume being down 31 percent year-over-year, a turnaround could be coming in the third and fourth quarters of the year.
“A strong rebound is expected in the second half of the year on the back of economic recovery and widespread COVID-19 vaccinations,” according to CBRE’s newly released Global MarketFlash.
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Although doubts have recently arisen regarding when—or even whether—the U.S. will reach herd immunity with respect to COVID-19, the report noted that the U.S. and the U.K., with their world-leading vaccination rates, have outpaced their peers in first-quarter investment volume.
“Based on the current pace of immunization and the broader economic recovery, CRE investment should be near the pre-pandemic level” by the second half of this year, CBRE projected.
In fact, CBRE estimated that global CRE investment volume will increase by approximately 15 percent to 20 percent this year.
The U.S. fared a bit better than the global market, with a 28 percent year-over-year decrease in investment volume.
Industrial investment showed continued strength in the first quarter, followed by multifamily; industrial and multifamily investment volume fell by 3 percent and 15 percent, respectively, year-over-year, excluding entity-level transactions.
Not surprisingly, retail investment was hard hit, falling 44 percent year-over-year, though office volume was not much better, having fallen by 34 percent. “Single-tenant assets drove activity in these two sectors due to more clarity on occupancy and rental income,” CBRE observed.
Oddly perhaps, hotels seem a bit of a bright spot. Hotel investment volume swelled by 14 percent year-over-year in the first quarter, according to CBRE. Though this was lifted by Colony Capital’s $2.8 billion sale of six hospitality portfolios, big hotel deals should continue this year, “as many operators face liquidity issues that will lead to lower pricing.”
The U.S. markets that are leading the CRE recovery are a disparate lot, CBRE reported. Boston, and Charlotte and Raleigh-Durham, N.C., all bucked the general trend, with 2020 and, so far, 2021 investment levels comparable to their five-year averages. Los Angeles, Dallas, Seattle and Atlanta too are regaining ground rapidly. Broadly, Sun Belt markets with steady job growth are in favor.
Nonetheless, investment activity continues to lag in some major metros, including New York, San Francisco, Washington and Chicago.
The rest of the world
In the first quarter, the Asia-Pacific region actually saw an overall 6 percent increase in investment, led by Taiwan, Australia and Singapore. Industrial properties (including cold storage) have done well.
After more than holding its own during most of 2020, the APAC office sector faltered in the first quarter, falling 9 percent year-over-year. CBRE projected, however, that “The region’s fast-growing services sector will lead to stronger growth in office investment.”
EMEA had its strongest first-quarter investment volume, despite an average one-third drop on a trailing 12-month basis.
Switzerland, Denmark and the United Kingdom “managed to keep the pandemic under relative control and led the region’s investment volume,” CBRE noted. However, Germany, France, the Netherlands and Sweden had COVID-19 resurgences of varying severity, and all sustained year-over-year investment volume decreases of more than 40 percent, as of the first quarter.
Read the full report by CBRE.