Investing in commercial real estate: research from JLL
Consulting company JLL conducted an analysis of the market. According to its results, in the third quarter of 2020, investment in commercial real estate declined by 44% to $149 billion. Despite these results, the figure is better than it was in the previous quarter. Then the volume of investments fell by 51%.
The positive dynamics in the third quarter is explained primarily by increased activity of investors from the EMEA region, as well as from the Asia-Pacific region. The volume of investments from these areas increased by 30%.
Last year was a real test for the commercial real estate market. Therefore, even now, investors are cautious about new projects; they are more focused on those objects that are guaranteed to bring revenue. When choosing one option or another, they study the demand and the level of its sustainability. The demand for logistic real estate has increased; businessmen are more interested in apartment buildings.
Liquidity at the global market depends on big investors, they have a share of 8% of total volume of investments. At the same time, a number of businessmen are turning their attention to domestic markets and segments in the regions. In the fourth quarter of 2020, intra-regional activity grew by 14%, which is a record for the last 10 years. The interest of local investors is most notable in Europe, where investments in the region from citizens amount to 30%. Such values were last recorded here in 2008. The reason for the increase in investment activity in the global market has been low interest rates and various government support programs. Thanks to them, the debt segment has been well supported. In spite of the fact that creditors take a conservative view of trends in the segment, the volume of transactions and the number of new players in the market continue to increase. In addition, the cost of debt for quality assets has reached pre-pandemic levels.
If we consider the past and current years in terms of how investments are distributed by sector, we can say that the previously accepted trend continues. In 2010, the share of investments in office facilities in the global market was 40% of the total capital inflow. In 2015 the figure was 35%, and in 2019 it was 35%. In 2020 the value was at the level of 33%. This situation indicates a decline of investments in office real estate. At the same time, there was a noticeable increase in investment in residential real estate – from 13% in 2010 to 24% in 2020. There is increasing demand for logistics and industrial facilities: in 2010, investments in this segment amounted to 10%, and in the last period – 19%.