Global Real Estate Perspective
August 2020

Second quarter data reflects impact of the global pandemic

The world is now in the midst of what is expected to be a deep but short recession, and this is flowing through to all sectors of the real estate industry. Decision-making processes are taking longer as uncertainty and disruption remain widespread.

In Q2 2020 global office leasing activity was 59% lower than a year ago while vacancy rates have started to creep up across the regions. The retail and hospitality sectors continue to be the most directly hit, reflecting reduced consumer spending and a pullback in both personal and business travel. Logistics market demand has slowed but remains relatively healthy as sectors such as medical supplies, groceries and online sales prove to be resilient.

Liquidity rising as headwinds gradually subside

Amidst widespread lockdowns throughout the second quarter, direct investment into global commercial real estate dropped 55% year-on-year, contributing to a 29% decline in first-half volumes. Sustained travel restrictions and challenges to perform due diligence have seen markets with deep pools of domestic capital and higher transparency prove more resilient and outperform the broader market. As uncertainty continues, investors are deploying defensive strategies, diversifying portfolios and looking to operationally-critical sectors such as the industrial and multifamily sectors as well as alternative assets.

Although economic headwinds persist and capital deployment to funds has slowed, debt markets are stabilizing and near-record levels of dry powder remain in the market. As investor sentiment shifts toward deal sourcing, capital will seek to take advantage of dislocations and distress emerging in the markets. As we look ahead, a broader recovery in the capital markets will accelerate price discovery and enable investors to better underwrite opportunities across sectors and risk profiles.

Key sector highlights:

• Investment: Disruption weighs on commercial real estate investment
• Offices: Impact of the pandemic filters through
• Corporate occupiers: Employee safety remains a priority
• Retail: Retailers focused on restoring profitability
• Logistics: Easing of disruption to global supply chains
• Hotels: Hotel markets re-open amid uncertainty
• Living: Multifamily showing resilient characteristics

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Global Real Estate Perspective is JLL's regular view on the impact of economic forces on property markets worldwide. It is a unique combination of updates from professionals on the ground and the insights of our leading research organization