Global real estate transaction volumes in Q3

Global real estate transaction volumes in Q3 2021 reached USD292 billion, up 77 per cent from last year. In EMEA, investment volumes surged to over EUR68 billion, up 26 per cent y-o-y with year-to-date volumes at EUR191 billion. 

This signifies a strong third quarter that’s in-line with the five-year average, showing market recovery from a turbulent pandemic recovery. Industrial & Logistics and Multifamily exhibited strong growth in Q3 across EMEA, with volumes up 59 per cent and 31 per cent respectively.

According to the recently published JLL (NYSE: JLL) Global Real Estate Perspective, a combination of robust deployment and competition for high-quality core and core-plus assets in the quarter allowed year-to-date volumes to reach all-time highs, at USD757 billion (up 50 per cent year-over-year) globally. In the EMEA region, Germany was the key driver for performance, with year-to-date volumes showing a rise of 22 per cent year-on-year to EUR50 billion, closely followed by the UK, which recorded volumes of EUR48 billion.

Adam Challis, Executive Director, Research and Strategy, EMEA, JLL, says: “It’s been an impressive quarter for commercial real estate, with recovery from the pandemic in full swing. Those sectors that remained resilient throughout the last year saw increased investment allocation and have experienced strong growth, whilst those who experienced uncertainty are also now becoming attractive again.

“We expect Germany, UK and France to perform well, which they did throughout the quarter, but we’re also seeing new highs from Sweden, Ireland, Poland and Italy, which will attract some of the well-established investors to newer markets throughout the remainder of the year.”

In the third quarter, investor focus on portfolio diversification remained pronounced, with an intense appetite for gaining exposure to sectors benefitting from demographic tailwinds and resilient end-user demand, including the living and logistics sectors. In parallel, conviction is building for lagging sectors in the current recovery, including retail and office sectors.

According to JLL analysis, living has seen USD219 billion of investment year-to-date, an 80 per cent increase over 2020 levels and 36 per cent over 2019. The sector is now the most active globally, ahead of offices, and is driving 29 per cent of transactional activity year-to-date. Activity has largely been concentrated in the US (representing 72 per cent of global living investment in 2021), but global volumes are increasingly supported by growing living investment across Germany, the UK and France. Japan continues to see strong interest from cross-border capital with international buyers representing more than 30 per cent of living investment year-to-date.

The industrial and logistics sector remains similarly liquid, with year-to-date investment gains of 78 per cent year-on-year. Volumes for large ticket deals, those valued at or above US$500 million, reached more than US$13 billion year-to-date at the conclusion of the third quarter.

Total retail investment is now up 35 per cent year-to-date (up from 31 per cent as of H1 2021), and office activity is now up 27 per cent year-to-date (up from 9 per cent as of H1 2021). Sentiment by retail asset type varies widely, but capital deployment is now expanding beyond necessity retail and lifestyle or entertainment-oriented centres, the most resilient retail assets thus far in the recovery. Capital is similarly rotating back into offices, with high-quality assets benefitting most.

Challis adds: “Despite the receding market uncertainty, there is no shortage of capital and we’re seeing real innovation in how it is being allocated towards real estate, with a rise of joint ventures and M&A activity. The potent mix of suppressed M&A activity last year and abundant dry powder is beginning to spark an extended period of deal making and M&A activity, which is something we should look out for during the next quarter and going into next year.”