Covid-19 caused global property investment volumes to plummet by a third in the first half of 2020 compared with last year, according to Savills.
EMEA was the least impacted region, with volumes down by only 19% compared with 45% across Asia Pacific, which was the first to be affected by the pandemic, and 36% in the Americas. This was partly due to a significant increase purchases and mergers of companies in the region.
Globally, these types of deals were up by 191% on the first half of 2019, although only still accounting for 12% of all deal volumes in the first six months of 2020.
Portfolio deal volumes fell by 13% and individual property deal volumes were down by 40%, this reflected caution from lenders and a tightening of lending criteria, Savills reported.
The hotels sector was the worst affected, with investment volumes down by 59% worldwide during the first six months of the year. Retail, meanwhile, was down by 41% and offices by 40%.
However, in EMEA, investment volumes within the residential sector did creep up by 7% and soared by 105% in the Asia Pacific region, driven by Blackstone’s purchase of Anbang’s Japanese apartment portfolio for circa $3bn in February. Industrial investment volumes in the Americas also rose by 6%.
Global cross-border volumes also declined by 30% during the first half of 2020, with the Americas recording the largest drop in inbound cross-border investment (-39%), followed by Asia Pacific (-35%) and EMEA (-25%).
“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 Savills world research director Sophie Chick.
“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. 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.”
Savills head of global capital markets Simon Hope 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.
“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.”
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