2019 commercial real estate transaction volumeBlog

2019 commercial real estate transaction volume

Published by Jennifer Rudden, Jun 24, 2020 In 2020, the volume of commercial real estate transactions is forecast to reach 478 billion U.S. dollars, down from 500 billion U.S. dollars in 2019.

Growth is expected to accelerate as investors establish cross-border investment vehicles.Investment in Asia Pacific had the smallest decrease of 1% from Q1 2018, which was the region’s strongest Q1 on record. As businesses return to normal in China and other parts of Asia, a rebound in investor confidence and transaction volume will probably arrive first in APAC.CBRE’s current forecast is for a roughly 30% decline in global investment volume in 2020, with slightly rising cap rates and broadly resilient capital values over the next two to three years.The seasonally adjusted volumes are shown in Figure A1. The strongest growth in Q1 investment volume was in the San Francisco and Seattle office markets, followed by the Phoenix and Boston multifamily markets, where rent growth has outperformed.EMEA investment volume fell by 23% year-over-year in Q1.

Nevertheless, because of an early holiday and an early COVID-19 outbreak in January, February 2020 outperformed previous years, but March was 24% below the five-year average (Figure 2). U.S. REITs contributed greatly to the overall growth, especially industrial and office REITs whose equity prices surged by 43% and 25%, respectively, in 2019.COVID-19 significantly cooled Americas investment activity in March (Figure 2). Office and residential sectors continued to draw the most investment, whereas industrial (41%) and retail (29%) sectors led the growth.APAC investment volume fell 22% year-over-year in Q1, mostly due to mainland China (-32%), Hong Kong (-72%) and Australia (-46%).

Excluding entity-level transactions, U.S. investment fell by a lesser 10% rate in Q1, with industrial sales reaching record-high Q1 levels and multifamily keeping strong momentum from last year, receiving 35% of total investment in Q1 (versus 26% in 2014).Facing stabilized or moderating capital appreciation, investors continued to emphasize rent growth.

The annual growth of global CRE investment in 2018 was revised to 7% from 5% with newly reported transactions.Q1 declines were recorded in all regions—the Americas (-15%), EMEA (-23%) and APAC (-1%). Industrial investment also grew in Japan, South Korea and Singapore on solid demand for last-mile logistics and cold-storage facilities amid a surge in online grocery sales.Due to Lunar New Year holidays, February often is a relatively quiet month in Asia. The strong momentum of entity-level transactions in the second half of 2019 carried over into Q1 2020, increasing global CRE investment volume by 15% year-over-year to US$235 billion. Japan (28%), India (40%) and New Zealand (199%) bucked the trend with a strong office sector. Excluding entity-level transactions, Q1 volume fell by 2% year-over-year. Global commercial real estate (CRE) investment volume fell by 16% year-over-year in Q1.

Notably, cross-border investment in Chinese office more than doubled Q1-on-Q1, driven by Swiss and Singaporean capital. The effect of COVID-19 is expected to weigh more heavily on investment volume in Q2. The residential sector fortified its position as the second-largest asset class in terms of transaction volume. Investors are now focused on prime assets with stable income streams and minimal vacancy risk.

Japan did not impose stringent lockdown measures and therefore avoided a full stop on activity. 2019 Commercial Real Estate Outlook: Agility is key to winning in the digital era 1 The ecosystem influencers— Investors ride on tech-enabled commercial real estate firms New business models and competition, extensive use of technology, and changing tenant and investor expectations are redefining the commercial real estate (CRE) industry. Compared with the average of the past five years, March 2020 had 40% less activity.EMEA registered its best Q1 on record, closing US$92 billion worth of transactions—a 46% increase from Q1 2019. US Transaction Volume Plunges in Q2: RCA Report Real Capital Analytics / July 24th, 2020 Coming off the high notes, Japan (-25%) and Hong Kong (-30%) abated the regional growth. The reintroduced industrial revitalization scheme in Hong Kong should generate strong interest from investors.CBRE’s outlook on 2019 global investment volume is unchanged for a single-digit drop from 2018’s banner record, with the first half being weak and second half stronger.

This likely reflected cyclical concerns about overpricing, a slowdown of the global economy and rising borrowing costs.

Demand for industrial assets remains high.

Investment volume likely will be on par with 2018 levels, though entity-level transactions will continue to boost total volume as they did in 2018. Other sweet spots included retail in Singapore and Japan, mixed-use in China and hotels in Australia. US Transaction Volume Plunges in Q2: RCA Report Real Capital Analytics / July 24th, 2020 Activity was down significantly in Germany (-30%), Denmark (-42%) and Spain (-56%). Mergers and acquisitions, a major growth driver in 2018, cooled across markets. The strong momentum of entity-level transactions in the second half of 2019 carried over into Q1 2020, increasing global CRE investment volume by 15% year-over-year to US$235 billion. Compared with Q1 2018, fewer ultra-large transactions amplified the slowdown in Germany, Spain and the U.K.

A better-than-expected U.S. economy, fiscal stimulus in Europe, low interest rates and ample liquidity are all supporting factors of a later uptick in activity, while supply and pricing constraints weigh on the other side, making a year-over-year match unlikely.2019 Global Investment Activity Expected to Rebound from Slow StartFor more information about this MarketFlash, please contact:

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