Global transaction activity hit a new record level in 2021
Global real estate market recovery is expected to hit the fast lane, with Q4 2021 volumes driving annual increase of 55%. According to Cushman & Wakefield’s The Signal Report: Global Guide to CRE Investing In 2022, demand will be just as strong this year, and while finding the right opportunities will remain an issue, activity in the first half of the year is expected to exceed 2021 and a 3% uplift is forecast for the year overall. Asia Pacific has been leading the recovery to date, with an earlier return of growth and pre-pandemic levels of investment activity in most markets. This momentum looks set to remain despite a COVID-led easing in Q1, and it will be strengthened by a deeper and wider level of occupier demand later in the year.
Asia Pacific Outlook
Transaction activity followed the earlier economic recovery of the APAC region, with 2021 investment volume exceeding pre-Covid levels following a comparatively mild 10% drop in 2020. This momentum will be maintained with both 2022 and 2023 expected to record double-digit volume growth as the economic recovery invigorates the occupier sector. Availability of stock is a potential headwind facing investors but with interest rate increases expected to be gradual, this should maintain investor confidence.
“Asia Pacific enters 2022 with strong underlying momentum but greater than expected short-term headwinds from the spread of Omicron and rising geopolitical risk. However, the momentum will assert itself in Q2, building upon the region’s re-emergence from prolonged lockdowns,” said Dr. Dominic Brown, Head of Insight & Analysis, Asia Pacific at Cushman & Wakefield. “The regional economy will regain the top spot in terms of the pace of economic growth in the second half of 2022, extending into 2023. Occupier markets are therefore forecast to strengthen in the year ahead, with demand more widely spread across the region.”
Global Investment Landscape
Transaction activity hit a new record globally in 2021, largely contributed by the pace of recovery seen in the Americas. After a 22% fall in global activity in 2020 as the pandemic hit, 2021 registered an astounding 55% uplift and this will be followed by a predicted 3% increase this year as EMEA and APAC accelerate further. Rising interest rates and normalizing economic growth rates will have a moderating influence on the pace of further increases in transaction volumes.
“Uncertainty will remain high due to the virus, inflation and geopolitical tensions, but most indicators point to a steady improvement in confidence at a social and business level globally as 2022 progresses. This will lead to a rising cycle of performance for most markets despite differing structural headwinds,” said David Bitner, Head of Capital Markets Insights, Global Research at Cushman & Wakefield.
The virus will continue to dominate in early 2022 but increased global immunity and greater knowledge about the virus will allow for a slow improvement and for return-to-work strategies to get back on course. This suggests better economic growth before the summer, which will feed occupier and investor confidence, though this could be undercut by rate volatility and geopolitical risk. In the second half of 2022, improving economic growth will hopefully be accompanied by better news on inflation and COVID-19. With government subsidies being reduced, the private sector will take over as the driver of expansion, and occupier markets will grow more confident.
Recovery will continue moving into 2023 with COVID-19 present in the background, and climate now the number-one risk factor for businesses. Occupier recovery will deepen, with office and retail markets benefitting, and structural change driving demand. For investors, the slow increase in interest rates may suggest that investment strategies need adjustment.
Note: For more investor insights, please refer to Cushman & Wakefield’s The Signal Report: Global Guide to CRE Investing In 2022.