Global commercial real estate investment at record levels

Created: 14 Jun 2022

Retail, offices, hotels, industrials and logistics property sectors, all experienced surges in investment activity in key global markets as confidence returned to commercial real estate given strong global economic growth, the removal of restrictions on international travel, and subsiding pandemic related risks. 


In the office sector, there was 35 per cent growth in leasing for the first quarter relative to a year prior globally, whilst this rose to 44 per cent in the United States. The  hybrid working model has spurred a flight to quality space with JLL estimating that over $81bn was invested worldwide in the first quarter, topping levels last seen in 2007. 


The hotel sector similarly experienced an uptick in investment levels of 127 per cent to $16bn in the first three months of 2022, relative to the previous year. Investor confidence is supported by high levels of demand for travel after years of impairment due to Covid-19. As such, operational risks are reduced, introducing several growth opportunities. 


In the retail sector, investment activity doubled in the first quarter relative to the previous year to $38bn on account of greater consumer spending alongside  rising online sales. UK GDP grew by 0.8 per cent over the course of the quarter, with robust employment figures  based on ONS data. This has strengthened investor sentiment in a sector that now has advanced digital capabilities, due to adaptations from the pandemic lockdowns, alongside open retail stores. 


A significant driver of logistics investment is the dearth of inventory driving rental growth of 10 per cent globally, with warehousing vacancy under 5 per cent across major markets. 


This record setting start to the year is subject to geopolitical and monetary headwinds, which are elevating the prioritisation of quality and diversification. The impact of monetary policy, supply chain impediments, and lenders increasingly averse to risk is likely to temper investment flows, which reached a first quarter record of $292 billion, according to JLL data. This eclipsed the last record first quarter in 2018 which stood at $225 billion 


With dry powder now estimated to be at US$388 billion, finding a home for capital will continue to be a challenge in 2022. An annual survey by real estate fund associations ANREV, INREV and NCREIF found that fundraising by real estate investment managers reached a pre-pandemic record high of €254 billion (US$239.5 billion) globally last year.