Global real estate investment volumes fell by 33% in H1 2020 compared to H1 2019, says Savills. Volumes fell most heavily in Asia Pacific, reporting a 45% drop in H1, reflecting the region being at the forefront of the Covid-19 pandemic, while volumes in the Americas and EMEA were down 36% and 19% respectively.
According to Savills in its latest update to its Impacts research programme, global cross border volumes fell by a similar amount to total volumes, declining by 30% in H1 2020 when compared to H1 2019. The Americas saw the largest fall in inbound cross border investment (-39%), followed by Asia Pac (-35%) and EMEA (-25%).
Unsurprisingly, the worst affected sector globally has been hotels, where investment volumes were down 59% in H1 2020 v H1 2019, while industrial has been the most resilient asset class, says Savills. However, residential (multifamily and student accommodation) and senior housing assets have seen smaller falls overall, and in fact volumes of investment into residential assets actually rose in EMEA and Asia Pacific by 7% and 105% respectively in H1 2020. The latter was driven by the significant cross border deal by Blackstone of a Japanese apartment portfolio from Anbang for around $3bn in February 2020.
The international real estate advisor goes on to say that EMEA’s smaller fall in H1 investment activity is partly due to a significant increase in entity-level deals (the purchase of or merger between companies). This was mirrored globally, with entity-level deals worldwide up 191% H1 2020 compared to H1 2019, while portfolio deal volumes fell 13% and individual property deal volumes were down 40%. However, entity-level deals remain a small part of the market overall, accounting for just 12% of all deal volumes in H1 2020. The larger fall in smaller transactions reflects more cautious lenders and tightened lending criteria, which is less of a barrier for the big institutional players, according to Savills.
Global real estate investment summary table: H1 2020 vs H1 2019
|
Total |
Office |
Industrial |
Retail |
Hotel |
Residential |
Senior |
|
|
Global |
-33% |
-40% |
-4% |
-41% |
-59% |
-26% |
-29% |
|
EMEA |
-19% |
-26% |
-12% |
-16% |
-53% |
7% |
-16% |
|
Americas |
-36% |
-44% |
6% |
-44% |
-65% |
-41% |
-35% |
|
Asia Pac |
-45% |
-51% |
-26% |
-57% |
-54% |
105% |
-59% |
Source: Savills Research using RCA. Residential includes multifamily and student accommodation. Data collected 30 June 2020.
Sophie Chick, director in Savills World Research team, comments: “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. Unsurprisingly, those asset classes that have been most effected by social distancing measures have been hit hardest, while industrial and residential, which is a long-term income play, have been impacted least. 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.”
Simon Hope, Savills Head of Global Capital Markets, adds: “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.
“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.”