Global Real Estate Perspective February 2021
JLL’s latest Global Real Estate Perspective looks at market dynamics during the last quarter and the prospects for 2021.
Ongoing restrictions hamper activity in Q4 2020
The start of 2021 feels very similar to the end of 2020, although there are rising signs of optimism. The global economy is expected to rebound strongly as the rollout of COVID-19 vaccines helps to support a cautious return to a more normal life later in the year.
Global office leasing volumes were 43% lower than a year earlier in Q4 2020, as momentum slowed due to rising restrictions in various parts of the world. Uncertainty and slow decision-making continued to inhibit activity within occupier markets. The retail and hospitality sectors faced ongoing headwinds with the re-imposition of restrictions, particularly evident in Europe, hampering any recovery. Meanwhile, the logistics sector goes from strength to strength with record demand reported in many markets in Q4.
Capital flows’ recovery continues to pick up pace
Real estate capital markets saw a continued rebound in activity in the final quarter of 2020, with the pace of quarterly declines decelerating. Robust transaction volumes during Q4, which were down a moderate 21% year-on-year, helped push full-year volumes to US$762 billion. Western countries with sectoral diversity, scale and transparency led the recovery over the past three months, notably France, Germany and the United States. Investor interest gained momentum in gateway markets, particularly in Europe and Asia, as well as in growing talent hubs.
A divergent appetite for risk remains prevalent for both investors and lenders, with high-quality, core product seeing the deepest liquidity. Sectors offering growth or stability such as logistics and living assets are experiencing more resilient pricing. However, as bid-ask spreads continue to converge and risk aversion begins to subside, broader gains are poised to accelerate, particularly in segments of the office, retail and hospitality sectors.
Key sector highlights:
- Investment: Capital flows’ recovery continues to pick up pace
- Offices: Momentum slows as restrictions hamper activity
- Corporate occupiers: Planning for a post-pandemic state
- Retail: A cautious recovery in leasing activity expected during 2021
- Logistics: Record demand for logistics space as e-commerce surges
- Hotels: Hotel markets eager to move forward after an unprecedented year
- Living: Ongoing investor interest in defensive Living sectors
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Global Real Estate Perspective is JLL's regular view on the impact of economic forces on property markets worldwide. It is a unique combination of updates from professionals on the ground and the insights of our leading research organization.