Resilient real estate picks up; what’s in store for the rest of the year?

After two consecutive quarters of declines, investment in global commercial real estate has picked up.

November 28, 2019

Global real estate investment volumes hit US$205 billion in the third quarter of this year, up 13 percent than the same period last year, according to JLL. This brings year-to-date activity to US$550 billion, one percent better than 2018.

The global performance has been driven by Asia Pacific which continues to experience record-breaking growth, particularly in China and Singapore

Despite a global economic slowdown and mounting political uncertainty across the world, commercial real estate is well positioned to continue its strong performance, says Pranav Sethuraman from JLL’s Global Capital Markets Research team.

“Returns for private real estate remain stable while public real estate continues to outperform other major asset classes at the global level. With the volume of capital held by funds that is yet to be deployed near all-time highs, investors, though increasingly cautious and selective, remain keen to access the sector."

As the current cycle continues to extend, managers are finding it challenging to deploy capital in an environment of elevated prices. Dry powder continues to build and stands at a record US$330 billion.

Despite the record-breaking investment in Asia Pacific, the story wasn’t the same across the board. A number of mega-deals in the Americas contributed to a surprise uptick in investment in the third quarter, reversing a period of declines. While a slowdown in EMEA’s core markets, namely Germany and the UK, causing regional investment to drop 13 percent year-to-date.

This will likely impact the final 2019 volumes, says Sethuraman.

“While the final quarter is traditionally the busiest, we still expect full-year investment to soften by roughly 5 percent, to around US$750 billion. Even though Asia Pacific continues to outperform, and the Americas surprised in Q3, the global decline will be primarily driven by weakness in EMEA, with activity likely to dip across all major sectors.”