Global Commercial Real Estate Investment Slows in Q2 Amid Heightened Uncertainty

• Global commercial real estate investment volume fell by 7% year-over-year in Q2 to US$276 billion (down 2% in local currency). An 8% increase in Americas region investment was offset by respective 21% and 29% declines in EMEA and APAC volumes. A strong U.S. dollar contributed to the lower investment volumes outside the Americas.
• Rising debt costs, economic uncertainty and the war in Ukraine weighed on investment activity.
• Among the major commercial real estate sectors, multifamily and retail had year-over-year investment gains, while office and industrial had slight decreases.
• CBRE forecasts an 8% decrease in full-year 2022 global investment volume from 2021’s record level. Nevertheless, it will be about 25% above the average annual investment volume between 2015 and 2019.

Global investment totals US$276 billion in Q2

Global commercial real estate investment volume fell by 7% year-over-year in Q2 to US$276 billion (down 2% in local currency). Investment grew by 8% in the Americas but fell by 21% in EMEA and 29% in APAC, based in part by the strength of the U.S. dollar. In local currency, EMEA and APAC volumes were down 11% and 22% respectively.

The multifamily sector had the biggest share of Q2 investment volume with US$93 billion, up by 14% from a year earlier. For the second consecutive quarter, office had the second highest volume at US$63 billion but was down by 13% year-over-year. Industrial & logistics volume fell by 18% year-over-year in Q2 to US$52 billion, while retail investment decreased by 12% to US$37 billion.

Figure 1: Global Commercial Real Estate Investment Volume, Q2 2022 (US$ Billions - Floating)

Source: CBRE Research, Real Capital Analytics, Q2 2022.

Figure 2: Share of Global Investment Volume

Source: CBRE Research, Real Capital Analytics, Q2 2022.

Americas volume up by 8%

Although higher borrowing costs and greater economic uncertainty weighed on U.S. real estate activity, Q2 investment in the Americas region grew by 8% year-over-year to US$172 billion.

Multifamily investment in the Americas surged by 30% from a year ago to US$79 billion in Q2 and continued its run as the most popular sector in the U.S., where it accounted for 42% of total investment in Q2. Investors are attracted to multifamily’s strong fundamentals amid a flight to quality during this current period of economic uncertainty.

Investment in the industrial & logistics sector fell by 4% year-over-year in Q2 to US$34 billion, as higher borrowing costs made large portfolio acquisitions more difficult to finance. Q2 volume was still well above pre-2019 levels.

Office investment decreased by 8% from a year ago in Q2 to US$25 billion. Although there is optimism about a recovery in office usage, higher interest rates are making office acquisitions more difficult to finance.

The fully reopened retail sector has performed well so far this year, with a 34% year-over-year jump in Q2 investment volume to US$22 billion. Relatively high yields and strong fundamentals in grocery-anchored centers have made this sector attractive to investors. Retail had significant portfolio sales activity in Q2.

Economic uncertainty and strong U.S. dollar weigh on European investment

European investment volume fell by 21% year-over-year in Q2 to US$76 billion (down 11% in local currency), largely from economic uncertainty and strength of the U.S. dollar.

Q2 office investment decreased by 29% year-over-year to US$23 billion. Investors are competing for prime office assets that meet sustainability standards rather than lower-quality assets that will be more costly to upgrade.

Investment in industrial & logistics assets fell by 20% year-over-year in Q2 to US$15 billion. Despite the decline, industrial sector fundamentals remain strong amid low vacancy and robust occupier demand.

Retail was the only sector in Europe with a year-over-year increase in real estate investment volume, up by 18% to $11 billion. Investor sentiment was boosted by an increase in consumer spending and travel.

Multifamily investment decreased by 33% year-over-year in Q2 to US$14 billion. Although investor interest in the sector remains strong, a shortage of for-sale assets weighed on volume.

COVID restrictions, higher interest rates weigh on APAC volumes

Asia-Pacific investment volume decreased by 29% year-over-year in Q2 to US$29 billion (down 22% in local currency), largely due to higher interest rates, COVID restrictions and the strong U.S. dollar.

Q2 office Investment grew by 17% year-over-year in Q2 to US$16 billion. Australia, Korea and Singapore were the most sought-after markets for quality office assets. However, rising interest rates in many APAC economies are expected to lessen office investment volume in coming quarters.

Industrial & logistics investment volume was down by 6% year-over-year in Q2 to US$4 billion. Still, investor interest in the sector remains strong. This will cause a rise in yields, although less so than other sectors, particularly in China, Hong Kong and Japan.

Retail investment plunged 43% from a year ago in Q2 to US$4 billion. Nevertheless, the sector’s outlook is positive as APAC countries continue to reopen to tourists.

Global Forecast

The global economy is expected to weaken amid rising interest rates. This will weigh on commercial real estate fundamentals and investment volumes into the first half of 2023. CBRE forecasts an 8% drop in global commercial estate investment volume this year, with 5% to 10% decreases in the Americas and APAC and a decline of 10% in EMEA.

Figure 3: Global Investment Volume by Sector (US$ Billions)

Source: CBRE Research, Real Capital Analytics Q2 2022.

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

Source: CBRE Research, Real Capital Analytics, Q2 2022.