JLL: Global Investment Volume Falls 14%

First quarter global investment volumes fell 14 percent year-over-year to $133 billion, reported JLL, Chicago.

All three global regions registered declining investor activity. The Asia-Pacific region fell 5 percent while the Americas dropped 16 percent and Europe fell 15 percent, JLL said.

“What started in late 2015 with heightened macroeconomic volatility in the market really transitioned and carried through in early 2016, especially in January and February,” said JLL Director of Investor Research Sean Coghlan. “We saw a lag in that impact on the commercial real estate market here in the U.S. specifically and we saw it impact volume, which declined for the first time in the current cycle early in the year.”

JLL’s Global Capital Flows report said global capital markets “had a major fright” at the beginning of the year for the first time since the financial crisis. “We have seen a number of significant events over the last eight years, each of which has had the potential to derail the recovery: Greek debt problems, quantitative easing, a cooling Chinese economy and numerous political problems,” the report said. “But the first few weeks of 2016 felt different partly because there was no one single trigger.”

With this widespread uncertainty as a backdrop, “real estate investment was certain to be affected, irrespective of the fact that it has managed to sidestep most of the issues over the last eight years,” JLL said. But the report noted that the top-line figures do not tell the whole story. “The reality of the quarter is not quite borne out by the hard statistics,” the report said. “The first six weeks of the year was exceptionally weak with volumes picking up and accelerating as we moved into March and the end of the quarter.”

JLL said it remains confident in predicting an “active year” for real estate investment despite the first quarter’s transactional activity decrease. “While the global economy looks to have a challenging year ahead, the amount of capital targeting real estate remains undiminished,” the report said. “As such we expect [full-year] transactional volumes to be at or around 2015 levels at between $650 and $700 billion.”

Coghlan noted that JLL sees expanding activity in many U.S. secondary markets, even as primary-market activity fell 24 percent compared to first quarter 2015. “And despite the decline in some markets like New York, San Francisco and Chicago, we’re seeing activity take off in Los Angeles specifically,” he said. “It remains concentrated from an investment sales perspective in West Los Angeles. Think West Side, Mid-Wilshire and the Tri-Cities, which are driving a lot of activity there.”