Global CRE Transactions Are Just as Gloomy as in the U.S.
Investment should improve by the fourth quarter.
Commercial real estate transactions around the world have been as dismal as they have been in the U.S., falling 55% year-over-year in the first quarter of 2023 to $147 billion in U.S. dollars, according to CBRE.
Deals fell 56% in the Americas with investment totals for all property sectors dropping. Multifamily declined 64%, while industrial investment fell by 49%, office dropped a bigger 71% and retail dropped 32%.
The turmoil in the commercial real estate industry is expected to help push the country into a moderate recession later this year with many pundits giving no more specific timetable than late 2023 or early 2024.
As for CBRE, it projects that a worsening macroeconomic outlook, tight credit conditions and financial market volatility will continue to weaken real estate fundamentals and investment activity into the second and third quarters. For the full year, CBRE forecasts a 26% reduction in global investment volume, with decreases of 27% in the Americas, 30% in Europe and 5% to 10% in APAC.
Then, “as economic conditions stabilize and a clearer outlook emerges for central bank policy, we expect commercial real estate investment volume will begin to improve in Q4,” it says.
Foreign Investment Picks Up in the U.S.
One bright spot for the U.S. CRE markets, though, have been the influx of foreign investment capital this quarter, according to Colliers Capital Markets.
Altogether, cross-border investment for the first quarter rose to $15.6 billion with a net acquisition of $11.7 billion, it reported and also noted that a recent Association for International Real Estate Investors survey showed U.S. allocations are up 6% on the year. And cap rates in this country also escalated more rapidly than in other regions of the globe, making U.S. real estate more attractive. Finally, because REITs have been hammered, they have become enticing for investors to snare at good prices before they possibly climb.
As an example, Aaron Jodka, Colliers’ Research Director of Capital Markets, points to global investment firm GIC’s partnership with Oak Street to take STORE Capital private in a $15 billion deal. That single transaction more than quadrupled sales volume from Singapore, Colliers reported.