Global Real Estate Perspective November 2021

The uneven recovery continues

Renewed COVID restrictions stemming from the spread of the Delta variant impeded the recovery in some parts of the world during the third quarter, but in most countries the economy continued to rebound. Uncertainty remains an ongoing theme; however, many real estate sectors are now starting to see signs of a demand recovery.

In the office market net absorption turned positive for the first time since the onset of the pandemic, while demand for logistics space has continued unabated. The recovery in retail and hotels is very market and sub-sector specific but some promising signs are emerging. Overall, sentiment and forward-looking indicators all point towards the recovery in economic and occupier activity being sustained and expanding through the next year.

Capital markets on track for recovery, despite continued unevenness

The capital markets continue to recover globally from their pandemic troughs, with several markets posting record year-to-date investment activity at the close of Q3. Robust deployment in the quarter allowed year-to-date volumes to reach all-time highs, at US$757 billion (up 50% year-over-year). Activity this year is tracking a modest 4% above 2019 levels. However, the impact of the Delta variant continued to result in an uneven investment landscape. Capital markets activity in the Americas and the largest economies in EMEA drove quarterly growth, as several of the markets that exhibited resilience in the early stages of the pandemic, such as Japan and South Korea, have experienced moderated capital markets activity in recent months. Robust competition for high-quality core and core-plus assets has resulted in the elevated prevalence of frustrated capital, and investors continue to move further out on the risk spectrum. Investor focus on portfolio diversification remains pronounced in the markets, and the living sector is now the most active globally, ahead of offices, and is driving 29% of transactional activity year-to-date.

Key sector highlights:

• Investment: Capital markets on track for recovery
• Work Dynamics: Corporate strategy continues to adapt
• Sustainability: Momentum around ESG persists
• Offices: Physical office space remains in demand
• Retail: A multi-speed recovery in retail emerges
• Logistics: Logistics demand set for record year
• Hotels: Delta variant slows lodging recovery
• Living: Secular demand drives increased activity

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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.