Global Real Estate Perspective August 2021

A multi-speed recovery

The pandemic remains in very different stages around the world with some economies re-opening with high vaccination rates while others are reimposing tougher restrictions. This is all flowing through to a multi-speed recovery in occupier markets, although the logistics and living sectors continue to show high levels of resilience.

Signs of a tentative rebound in the global office market persisted in Q2 with leasing volumes up 44% on a year ago, although they remain 36% below Q2 2019. In Europe and the U.S. forward-looking indicators suggest a stronger second half to the year while performance in Asia Pacific is being heavily influenced by the management of COVID cases.

Capital markets activity accelerates

The scale and scope of the real estate capital markets recovery continued to broaden throughout the second quarter of the year. Activity was particularly robust in markets with sectoral diversity and opportunities of scale. Global transaction volumes totaled US$247 billion during Q2 2021, up 103% from the market trough experienced one year ago and roughly in line with Q2 2019. Portfolio diversification remains a critical theme in the capital markets. This is benefitting countries with ample investible living, logistics and alternatives product, each of which has experienced moderated declines and quicker recoveries.

Robust pipelines and deal flow coincided with expanding access to vaccines in many of the largest commercial real estate markets. In Europe, Germany and the UK drove investment – representing 55% of activity in Q2 2021. The U.S. witnessed a pronounced rebound in activity (up 161% in Q2), and optimism is broadening to lagging segments of the market. And, in Asia Pacific, China and Australia drove gains.

Key sector highlights:

• Investment: Capital markets recovery accelerates
• Work Dynamics: Corporates navigate uncertainty
• Sustainability: Commitments toward climate action pick up pace
• Offices: Optimism filters through the office market
• Retail: Recovery gathering pace in key retail markets
• Logistics: Logistics demand remains elevated
• Hotels: Lodging recovery linked to vaccination rates
• Living: Structural shift to living sector continues

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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.