Global CRE Activity Drops

Commercial real estate transaction volume is slowing worldwide, reported Real Capital Analytics, New York.

“Looking at the count of closed deals the picture is even gloomier as the COVID-19 crisis takes its toll on commercial property markets worldwide,” said RCA Senior Manager of Analytics Alexis Maltin and Analyst Beatrice Ginieis in the firm’s Global Activity Tracker report.

Activity in the Americas has dropped 7 percent in dollar volume in the first 125 days of the year compared to a year prior, and in the Europe-Middle East-Africa region volume fell 14 percent from a year ago, RCA said. Looking at deal-count figures, the Americas saw deals fall 32 percent compared to early 2019. For EMEA, deal count fell 40 percent.

JLL, Chicago, said due to broader market volatility and uncertainty, direct investment in global commercial real estate dropped by 5 percent year-over-year in the first quarter, falling to $200 billion. “Performance varied across the regions, with capital flows generally tracking the evolution of the pandemic,” the JLL Global Market Perspective report said. “As investors increasingly look to income stability, operation criticality and occupation density as key arbiters to asset-level risk, sectors such as industrial and multifamily are expected to benefit.”

Lenders remain in a ‘price discovery’ phase, focusing on asset-managing their existing portfolios, JLL said. “This has led to a greater scrutiny over leverage, and an emphasis on experienced sponsors, resilient sectors and strong locations in quoting new deals,” the report said.

Private closed-end real estate funds saw their lowest-first quarter fundraising since 2013, with just $22.3 billion raised through March 31. Investors are consolidating their investments with the most experienced managers; nearly 38 percent of all first-quarter capital raised by just five funds globally. “As we look ahead, with the near-record volume of dry powder held by investors, global commercial real estate is still poised to see healthy investment over the medium- to long-term,” JLL said. “However, the repercussions of the pandemic will be realized in the short-term and will result in a drop off in capital flows in the sector.”