Global real estate consultant JLL is reporting this week that after a bumpy 2018, investment in global commercial real estate cooled in the first half of 2019 with year-on-year volumes dropping by 9% to $341 billion.
All three regions performed differently, with activity falling in EMEA and the Americas while Asia Pacific broke yet another record as volumes hit a new first-half high of $86 billion.
Structural shifts continue to impact the retail sector while ongoing political and economic uncertainty is also taking a toll on investor sentiment.
On the other hand, risk-free rates continue to plummet, lowering financing costs and widening spreads to property at a time when investors are hungrier than ever for yield. Although prices are elevated across many global markets, fundamentals remain sound, underwriting is disciplined, debt levels are generally modest, and investors are still keen to access the sector, says JLL.
JLL further reports fundraising by private closed-end real estate funds recorded its highest ever first-half level at over $80.3 billion. Meanwhile, dry powder continues to build and now stands at a record $331 billion. As the current cycle continues to extend, managers are finding it challenging to deploy capital in an environment of elevated prices.
As JLL looks ahead to the second half of 2019, they still expect investment to decline, by approximately 5-10%, to around $730 billion for the full year as investors continue to respond to the overall global environment.