Global CRE Investment Slowdown Eases

CBRE reported global commercial real estate investment reached $231 billion in the second quarter, up 17 percent from the previous quarter but down 7.5 percent from a year ago.

The U.S. accounted for 53 percent of global CRE investment year-to-date, CBRE said.

“The Americas, Europe-Middle East-Africa and Asia-Pacific markets all reported a rebound in investment from the first quarter but a drop in first-half activity from the same period last year, in part due to fewer ultra-large transactions and a lack of quality assets for sale,” the CBRE Marketflash report said.

Global investment volume totaled $428 billion in the first half, down 10.6 percent from first-half 2018. “Nevertheless, with some slight improvement in the U.S. economy and central banks cutting interest rates, prospects for the second half of the year are good,” CBRE said.

Strong leasing activity underpinned renewed investor demand for office assets, the report noted. Both Boston and San Francisco both saw 50-plus percent year-over-year growth in transaction dollars. Industrial and hotel sector activity leveled off during the quarter.

While most property sectors had fewer large-ticket transactions, deals exceeding $100 million dominated the office sector. “This likely is because occupier demand for high-quality office space remains high due to healthy employment growth,” the report said. “With the global economy in the eleventh year of what is officially the longest cycle on record, investors want stable trophy assets to secure cash flows and for potential downturn protection.”

Entity-level transactions cooled, especially in the industrial and retail sectors, due to weaker economic sentiment. U.S. transactions grew 3.4 percent year-over-year including entity-level transactions and 7.7 percent excluding entity-level transactions.

As hedging costs trended down for U.S.-dollar-denominated assets, there was an uptick of cross-border investment in the U.S., driven by investors from Canada, Israel, Germany and the U.A.E., the report noted.

CBRE predicted global CRE investment will drop one single-digit percentage point drop from 2018’s record. Compared with the same period last year, first-half 2019 volume fell 10.6 percent. But a continued “buoyant” U.S. market, coupled with restored fiscal expansion and monetary easing around the world, potentially supports a stronger second half of investment activity, the report said.