In the second quarter, global commercial property investment fell by 57%.

 

Coronavirus will have a significant impact on the global commercial investment industry in 2020. buy property in qatar for expats

According to a new analysis from CBRE, considerably lower commercial real estate investment volumes in the second quarter of 2020 reflect the effects of the COVID-19 crisis lockdown measures and border controls. The amount of global investment plummeted by 57% year on year to $109 billion, the lowest quarterly sum since 2010.

The Americas region was the hardest hit, with a 70% drop year over year due to fewer large portfolio transactions and the absence of entity-level transactions. Investor sentiment was impacted by uncertainties and restrictions in EMEA and APAC, which saw total volume decrease by 38 percent and 46 percent, respectively.

The strength of the first quarter resulted in a 21 percent drop in H1 2020 investment volume. As countries reopen their economy and corporate activity restarts, Q2 may have reached the low point. Beginning in H2 2020, investors expect a modest recovery.

 

In Q2, the Americas Americas investment volume decreased to $43 billion, the lowest since 2010 and barely 30% of the amount in Q2 2019. The United States accounted for 93 percent of all investment activity in the region. Portfolio sales in the Americas fell by 77% year over year, with no entity-level purchases.

Despite a 50 percent year-over-year drop in Q2 investment volume, industrial assets showed resiliency. Industrial investment increased 17 percent year over year in H1 2020 thanks to two Prologis M&A agreements in Q1. Industrial investment fell 18 percent in H1 after excluding the two Prologis mergers, but it still outperformed all other sectors over the same period. In Q2, retail investment volume dropped by 74% year over year, followed by a 72% drop in the office and multifamily sectors. The most badly damaged assets were hotels, which saw a 90 percent reduction in business and the lowest quarterly total since 2003.

The drop in investment activity at the municipal level in the Americas appears to be linked to the number of new COVID-19 cases (Figure 2). Seattle (-84 percent ), Orlando (-81 percent ), Los Angeles (-80 percent ), and New York (-80 percent ) were among the cities with the biggest drops in Q2 investment volume (-71 percent ). The continuous rise in COVID-19 cases in the United States, Brazil, and other regions of Latin America will stymie the region's economic recovery.

Business confidence and investment activity will improve in H2 2020 if testing levels, tracking, and treatments improve as planned. Increased transparency on pricing and rental rates could entice bargain-hunting investors back into the market.

 

EMEA EMEA investment volume declined 38% year over year to $48 billion in Q2, a far less severe decline than other world regions and accounting for 44% of overall global investment volume in Q2 (relative to its average share of 33 percent over the past five years). EMEA's Q2 fall was completely offset by a record Q1 this year, resulting in a 2% increase in H1 2020 investment volume year over year.

Investment will be tempered by economic uncertainties in 2020, though hints of recovery were apparent in June. The industrial (-34%) and multifamily (-29%) sectors are still appealing, with core industrial yields anticipated to hit new lows. Repricing is a risk for value-add office assets. Due to large-ticket deals in Germany and France, retail investment volume decreased by a smaller-than-expected 23 percent year over year. The amount of money invested in hotels decreased by 83 percent in the first quarter of this year, to the lowest level in over a decade.

In comparison to the rest of Europe, Germany (-20%), the Netherlands (-23%), and Poland (-22%) witnessed very mild year-over-year drops in Q2 investment volume. Switzerland (+174 percent) defied the trend and nearly quadrupled its volume year over year, thanks in part to the acquisition of Swiss department store chain Globus by Thailand's Central Group and Austria's Signa. The pandemic had a toll on the United Kingdom (-56 percent), France (-57 percent), and Sweden (-45 percent), with severe drops in Q2 investment volume. Further recovery is projected in H2 2020 as European economies move forward with staged openings.

 

APAC In Q2, APAC investment volume plummeted by 46% year on year to approximately $18 billion, the lowest quarterly total since 2012. The recurrence of COVID-19 cases in China, Japan, and Australia, as well as the current first wave of infections in India, have cast doubt on the region's economic prospects and delayed the investment recovery period.

Following the global trend, APAC industrial investment volume fell by just 17% in Q2 and 8% in H1 compared to the previous year. Office investment volume declined by 46% in Q2, accounting for 56 percent of all APAC transactions, as investors shifted their focus to smaller deals or partial shares in high-priced assets. The retail and hotel sectors continued under pressure, with quarterly totals falling to their lowest levels since the Global Financial Crisis. Investor interest in retail properties with residential components, on the other hand, has increased. Domestic investors in the Pacific expressed interest in big-box retail properties with long-term leases from supermarket tenants.

With a quarter-over-quarter reduction of -23 percent, APAC saw the smallest drop in Q2 investment volume among the three areas. Large deals in Australia (-21%) and South Korea (-36%) helped to keep volume decreases to a minimum. Due to lower activity in gateway markets such as Tokyo and Beijing, Greater China (-49%), Japan (-48%), and Singapore (-57%) suffered poorly. If price concessions are offered, investors look willing to re-enter the market.

 

Global Commercial Forecast for 2020

Due to the return of COVID-19 cases in the Americas, CBRE's full-year worldwide investment prediction has been revised down to -38 percent from -32 percent, potentially delaying economic recovery. Given the widespread progress in containing COVID-19, a global resurgence in investment activity is still projected to occur before the end of the year.