Global Real Estate Investment Plunged By 33% In First Half Of The Year

Cross-border investments in global real estate plunged by 33% in the first half of the year compared to the first half of 2019, according to a report released Monday by Savills, the London-based global real estate services provider.

The largest declines were seen in the Asia Pacific region, down 45%, and the Americas, down 36%.

By sector, investments in hotels suffered the steepest drop, down 59% on a global basis. Investments in retail properties and office spaces plunged 41% and 40%, respectively.

Industrial properties showed the most resilience, with investments slipping by only 4%.

Interestingly, investments in residential properties in Asia-Pacific actually surged by 105% -- partly boosted by the purchase of a Japanese apartment portfolio by Blackstone Group for about $3 billion in February 2020.

“Overall the global 33% fall in real estate investment activity so far this year is less than the decrease at the start of the global financial crisis in the first half of 2008, when real estate investment volumes across the world fell by 49% and continued falling until mid-2009,” said Sophie Chick, director of Savills World Research team. “Unsurprisingly, those asset classes that have been most [affected] by social distancing measures have been hit hardest, while industrial and residential, which is a long-term income play, have been impacted least.”

By region, Europe, the Middle East and Africa, or EMEA, saw only a 19% decline in investments.

“The huge increase in entity-level deals in EMEA has helped insulate that market from the biggest falls, as some buyers have used this period for opportunistic M&A or equity deals,” Chick explained.

Simon Hope, Savills’ head of global capital markets, added: “Volumes are expected to remain well below pre-pandemic levels for the rest of 2020 as investors wait for market clarity. However, certain sectors are expected to outperform as investors focus on secure assets, namely logistics, residential and life sciences.

Hope also noted that looking ahead, “there seems to be general consensus across G8 governments around the world to build their way out of this downturn, turning on a tap of capital for infrastructure projects. This generally bodes well for the real estate industry as it potentially creates more assets to invest in as well as reducing unemployment rates.”

The International Monetary Fund expects the global economy to shrink by 4.9% this year.

But some countries, including the U.K., plan to increase spending on infrastructure projects to push their economies out of recession.

For instance, Prime Minister Boris Johnson has said his government plans to “build, build, build” to boost growth.