Resilient, yet uneven, market conditions

Global Real Estate Perspective, May 2021

The early stages of the recovery remain mixed and uneven. The relative resilience and strength of the transactional environment varies by country. Globally, transaction volumes totaled US$187 billion during Q1 2021, marking a 13% decline year-on-year. Mature, liquid markets with deep access to capital are experiencing the healthiest appetites for commercial real estate product.

The focus on portfolio diversification is benefitting markets with diverse property markets – of note, those with established or growing Living, logistics and alternatives sectors. Markets with Living sectors were the most significant beneficiaries in Q1, led by the U.S. and Europe. Living investment saw an increase of 66% in Europe, led by the UK, Germany and France. While still down in activity, markets historically concentrated in office and retail investment are experiencing gains in investor confidence, particularly in Asia.

Markets with deep access to capital continue to exhibit greater stability, as varied health protocols continue to hinder a broader recovery in cross-border capital flows. Intraregional investment’s share of global volumes slipped to 12% in the quarter, as challenging border restrictions within Europe weighed on overall activity. Conversely, interregional investment corridors are allowing activity to pick up in select markets.

The debt markets saw increased activity and heightened competition in Q1 2021, as the lender pool expanded for the second consecutive quarter. The re-emergence of previously side-lined lenders, coupled with improving rent collection metrics, led to more aggressive term agreements. Concurrently, the convergence of buyer and seller expectations has broadened from growth sectors – logistics and Living – to stable segments of office and retail markets.