Commercial Property Investment News – Global property consultancy JLL, which tracks transactions in the Irish investment market, reported this week that €1.5 billion of investment transactions were completed in the second quarter of 2021. This is a particularly strong, and combined with the first quarter, this indicates that trade in investment operations amounted to 2.7 billion euros. the first 6 months of the year.
Transaction volumes have been dominated by PRS, logistics and offices over the past few quarters, accounting for 51%, 22% and 21% of the quarter’s volume, respectively. PRS continues to be the focus of investors’ attention, and the top three deals include PRS. This includes: Royal Canal Park, Ashtown, Dublin, which was bought by Union for €200m; The Dwyer-Nolan portfolio in north Dublin, which was acquired by Ardstone for €181m; and a confidential off-market transaction for 177 million euros.
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Hannah Dwyer, head of research at JLL Ireland, said: “It is good to see that investment volumes in Irish property remain strong and the activity in the second quarter reflects the strong demand we are seeing from investors. As predicted earlier this year, there is particular interest in the PRS, office and industrial sectors as market fundamentals in residential markets drive investor interest in these sectors.PRS remains the best performing sector performance with no short term solution to the housing shortage across the region Spending on the Irish PRS market is €1.5 billion year to date and €6.2 billion over the past 3 .5 years. This quarter was also particularly strong for the logistics sector, with 6 major deals exceeding €20 million in transactions. There have only been 24 deals of this size in the history of the Irish market and a quarter of these have been done e in the last 3 months. This reinforces the demand we are seeing, with high levels of on-site investor demand for large-scale Dublin logistics assets. Any future superior quality product in a good location near transport hubs is expected to be in high demand and prices.”
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With nearly half the world’s population vaccinated and the incidence of the delta variant of COVID-19 declining, global GDP is on track to reach pre-Covid-19 levels by the end of the year, according to real estate consultancy global CBRE. With ample liquidity and low global bond yields despite higher inflation, investors enthusiastically poured capital into commercial real estate in Q3, setting 2021 for record annual investment volume.
Global investment volume rose 95% year-over-year in the third quarter to $315 billion. All three global regions (Americas, EMEA and Asia Pacific) saw strong investment activity that was on par with 2019 levels. Year-to-date, global volume exceeded 2020 by 44% and 2019 by 3%.
Investor interest in the multi-apartment sector, particularly in the US, Germany and Sweden, contributed significantly to the growth in investment volumes in the 3rd quarter. The acquisition of industrial and logistics real estate remained popular in the regions. Office and retail investment volumes are still recovering, but the resilience of high-quality asset values suggests improving market conditions.
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Investment volume in the Americas continued to show impressive strength in the third quarter of 2021, led by the US multifamily sector. Total investment volume in the region increased 152% year-on-year in the third quarter and 74% from last year. Excluding transactions at the level of organizations, the volume of investments increased by 141% compared to last year. Compared to the trend before COVID-19, accelerated growth in Sun Belt markets has offset the lack of large cash transactions in gateway markets this year, but the return of trophy office sales is long awaited and fundamental to a full recovery of commercial real estate investment. .
The multifamily sector’s share of America’s total grew to 39% in the third quarter, from an average of 28% between 2015 and 2019. Sun Belt markets, led by Dallas, Atlanta and Phoenix, have experienced a boom in population and employment growth, which has led to significant capital inflows over the past 12 months.
Meanwhile, after two years of exceptional performance, the industrial sector showed some signs of relaxation as its share of the total fell to 23%. The industrial sector is expected to remain healthy thanks to growth in e-commerce and manufacturing, but investors are becoming more selective in the face of record interest rates.
Hotel sales have recovered significantly over the past six months, driven by coastal markets and portfolio acquisitions. With the easing of travel restrictions, domestic and international tourism should support a further resurgence of service-based retail and hospitality.
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The share of the office sector in the total volume of investments fell to a new low in the region: 19%. The share of retail trade fell to 9%. Delays in returning to the office and a potential cultural shift towards flexible working have forced investors to focus primarily on stable core assets. Office limits, while based on fewer trades than usual, were in line with pre-COVID-19 levels. In the retail sector, peak rates fell in grocery shopping malls. Suburban assets outperformed urban assets, mainly due to higher yields.
Economic recovery and a reduction in the number of COVID infections, particularly in Europe, have restored investor confidence and returned investment volume in the EMEA region to pre-Covid-19 levels. Total volume in the region grew 56% year-over-year in the third quarter to $94 billion. The volume of investments since the beginning of the year increased by 10% compared to the same period in 2020 and remained at the same level (-2%) since 2019.
Sweden (186%), the Netherlands (126%), Germany (96%) and the UK (68%) led year-on-year growth in the third quarter, driven mainly by rapid growth in the residential/apartment sector, including 10 .6$. Heimstaden’s acquisition of a €9.1 billion housing portfolio in Germany and the Scandinavian countries. The UK industrial sector has also attracted a large amount of capital from cross-border investors.
The share of the multi-family and industrial sectors in the total volume of investments in EMEA reached 27% and 19%, respectively, in the third quarter. Both sectors received a significant boost from the pandemic as capital moved primarily to these two outperforming sectors. Markets in Germany, Sweden and the Netherlands grew due to increased supply of multi-family apartments. The UK and other markets are expected to follow suit, driving further growth across the continent. Investor appetite and user demand for industrial real estate remained strong thanks to the growth of e-commerce.
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The office sector’s share of total investment has fallen to 31% from 40% pre-Covid due to continued uncertainty over office use. But it still had the highest share of any sector as rent growth resumed in Tier I markets and tenants began to return and make rental decisions.
Despite the prolonged decline in retail investment, the recovery is likely to resume in the coming quarters due to relatively low retail asset prices. The growth of hotel investment in the third quarter indicates that the worst is behind the sector, with very few sales.
Investment volume in the Asia-Pacific region rose 24% year-over-year in the third quarter to $34 billion. Year-to-date volume is $102 billion, up 41% from the same period in 2020 and exactly in line with 2019 levels. Continued supply chain disruptions and rising commodity prices first have affected the region’s economic outlook, and are likely to hold back investment in 2022.
Hong Kong (354%), Australia (121%) and Japan (89%) led year-on-year growth in the third quarter. In Japan, the $2.5 billion sale/leaseback of Dentsu’s headquarters reflected a global trend of corporate tenants taking properties off their balance sheets. Other major office markets such as Seoul, Shanghai, Melbourne and Hong Kong also performed well in the third quarter. Apart from trophy assets, secondary offices in prime locations with potential for upgrading or repositioning are also attracting interest based on demand for quality occupiers. The share of the office sector in the total volume of investments in the Asia-Pacific region remained close to 50%.
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Industry’s share of total investment fell slightly quarter-on-quarter to 21% in the third quarter, but remained well above the 2015-2019 average of 13%. Almost all countries have seen significant growth during the pandemic, particularly Australia and mainland China. Strong investor demand has accelerated capital rate compression in core assets and pushed investors up the risk curve.
The retail and multi-apartment sectors each account for approximately 10% of total investment, with an upward trend in Q3. Hotel investment has yet to pick up, pending a wider easing of travel restrictions. These sectors represent upside potential for the fourth quarter and next year as equity looks for countercyclical opportunities amid tight yields.
Global commercial real estate investment is poised for a strong fourth quarter and a record year in 2021. Strong momentum continues for multifamily and industrial investment, while retail and hotel investment is expected to rebound with increased international mobility. A long-awaited office recovery is taking place in suburban markets, and urban markets will likely follow next year.
CBRE estimates annual global investment volume to grow around 28% in 2021 and, thanks to a strong base, a more moderate 8% in 2022.
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