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Global MarketFlash:
Q1 Transaction Volumes Surprised on the Upside but a Decline in March Foreshadows a Weak Q2

April 30, 2020

Executive Summary

  • Global commercial real estate investment, including entity-level transactions, increased by 15% year-over-year in Q1 2020 to US$235 billion. Excluding entity-level transactions, global Q1 investment volume was slightly down (-2%) from a year ago.
  • EMEA reported its best first quarter on record, with 46% year-over-year growth in investment volume thanks to closures of large-ticket entity-level transactions in Germany, the U.K. and Sweden.
  • Early signs of COVID-19 impact on CRE investment emerged across regions, signalling a painful Q2 ahead.

The strong momentum of entity-level transactions in the second half of 2019 carried over into Q1 2020, increasing global CRE investment volume by 15% year-over-year to US$235 billion. Excluding entity-level transactions, Q1 volume fell by 2% year-over-year. The effect of COVID-19 is expected to weigh more heavily on investment volume in Q2.

Figure 1: Global Commercial Real Estate Investment (US$ Billions - Fixed FX)

Global-MarketFlash-04302020 f1

Source: CBRE Research, RCA (Americas), Q1 2020.

Total Americas investment volume increased by 8% year-over-year in Q1. Excluding entity-level transactions, however, Americas volume was down by 6%. U.S. REITs contributed greatly to the overall growth, especially industrial and office REITs whose equity prices surged by 43% and 25%, respectively, in 2019.1 Prologis’ US$13 billion acquisition of Liberty Property Trust and US$4 billion acquisition of IPT accounted for 14% of total U.S. volume in Q1. Canada had a similar trend; multifamily REITs like CAPREIT expanded their portfolios.

COVID-19 significantly cooled Americas investment activity in March (Figure 2). Compared with the average of the past five years, March 2020 had 40% less activity.2 The hotel sector was the most affected, with investment volume down by 47% year-over-year. A similar degree of loss is expected in Q2. One potential upside is reduced hedging costs against the U.S. dollar, since the Fed cut interest rates close to zero. This presents an opportunity for foreign investors to purchase U.S. assets at a bargain. With ultra-low global bond yield expectations, the attraction of higher yields in income-generating assets should remain.

Figure 2: Investment Volume Slows in March

Global-MarketFlash-04302020 f2

Source: CBRE Research, RCA (Americas), Q1 2020.

EMEA registered its best Q1 on record, closing US$92 billion worth of transactions—a 46% increase from Q1 2019. Entity-level deals larger than US$500 million made up 25% of the total investment volume, including the US$7 billion merger of Luxembourg-based ADO Properties and Germany's Adler Real Estate (focused on residential assets) and Blackstone’s US$6 billion acquisition of iQ Student Accommodation in the U.K. Capital has been attracted to European alternative sectors. Social infrastructure such as schools and health care facilities have grown rapidly in continental Europe, as exemplified by SBB’s strategic takeover of Hemfosa in the Nordics.

Excluding entity-level deals, EMEA investment volume still grew by 13% year-over-year, led by growth in several of the larger markets including Germany (18%) and France (38%). Office and residential sectors continued to draw the most investment, whereas industrial (41%) and retail (29%) sectors led the growth.3 But early signs of a “technical pause” emerged as deal volume dropped 29% in March against its five-year average. As the initiation of new deals became challenging, more investment decisions will be delayed to the second half of 2020.

APAC investment volume fell 22% year-over-year in Q1, mostly due to mainland China (-32%), Hong Kong (-72%) and Australia (-46%). Japan (28%), India (40%) and New Zealand (199%) bucked the trend with a strong office sector. Japan did not impose stringent lockdown measures and therefore avoided a full stop on activity. Investors are now focused on prime assets with stable income streams and minimal vacancy risk. Industrial investment also grew in Japan, South Korea and Singapore on solid demand for last-mile logistics and cold-storage facilities amid a surge in online grocery sales.

Due to Lunar New Year holidays, February often is a relatively quiet month in Asia. Nevertheless, because of an early holiday and an early COVID-19 outbreak in January, February 2020 outperformed previous years, but March was 24% below the five-year average (Figure 2). As businesses return to normal in China and other parts of Asia, a rebound in investor confidence and transaction volume will probably arrive first in APAC.

CBRE’s current forecast is for a roughly 30% decline in global investment volume in 2020, with slightly rising cap rates and broadly resilient capital values over the next two to three years.

Figure 3: Total Value of Commercial Real Estate Investment Transactions (US$ Billions)*

Global-MarketFlash-04302020 f3

Source: CBRE Research, RCA (Americas), Q1 2020.
*Values include entity-level transactions and exclude development sites.
**In order to calculate global totals, local currency values are converted to US$ using the most recent quarterly FX rates of Q1 2020. This calculation eliminates currency impacts over time and generates the same growth rates as in local currencies.


The seasonally adjusted volumes are shown in Figure A1. These give a more accurate picture of transaction activity from quarter to quarter across any one year.

Figure A1: Seasonally Adjusted Investment Volume (US$ Billions - Fixed FX)

Global-MarketFlash-04302020 fA1

Source: CBRE Research, RCA (Americas), Q1 2020.

1 Calculated using Wilshire REIT Price Index.
2 Index rebased on January levels to show monthly activity with no yearly gap.
3 Excluding entity-level transactions.

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For More Information

Richard Barkham, Ph.D.
Global Chief Economist, Head of Global Research & Head of Americas Research
+1 617 912 5215
Wei Luo, Researcher
Wei Luo
Global Associate Research Director
Capital Markets
+1 212 984 8153
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Daniel Chang
Research Analyst