Global real estate investment plunges amid pandemic

However, certain sectors are expected to outperform as investors focus on secure assets, analyst says

LONDON • Global real estate investment fell by 33% in the first half (1H) as the coronavirus pandemic battered economies and disrupted deals.

The Asia-Pacific region took the biggest hit, with volumes down 45% from the year-earlier, as it was the first struck by the outbreak, according to a report from broker Savills plc. Investment dropped by 36% in the Americas and 19% in Europe, the Middle East and Africa.

“Investment is expected to remain well below pre-pandemic levels for the rest of 2020 as investors wait for market clarity,” Savills head of global capital markets Simon Hope said in a statement yesterday.

“However, certain sectors are expected to outperform as investors focus on secure assets, namely logistics, residential and life sciences.”

The global economy has been hammered by the pandemic, with the International Monetary Fund (IMF) forecasting a 4.9% contraction this year. IMF chief economist Gita Gopinath previously said the cumulative loss for the world economy this year and next because of the recession is expected to reach US$12.5 trillion (RM53.25 trillion).

“Still, the investment decline was less severe than at the start of the last financial crisis in the 1H of 2018, when investment cratered by 49% and kept falling until the middle of 2009,” Savills World Research team director Sophie Chick said in the statement.

With the tourism industry shut down for months by government lockdowns, hotels saw investment decline by 59% in the 1H20, followed by a 41% drop for retail properties, according to the Savills report. Industrial and residential properties fared better.

Among the few bright spots in the Savills’ report was a 105% increase in Asian residential real estate investment, driven by Blackstone Group Inc’s deal to buy a collection of Japanese apartments from Anbang Insurance Group Co Ltd for close to US$3 billion, according to the report.

The UK and other major countries have indicated that they intend to boost spending on infrastructure projects to help lift their economies out of recession. Prime Minister Boris Johnson, for example, has said his government plans to “build, build, build” to drive growth.

“This generally bodes well for the real estate industry, as it potentially creates more assets to invest in, as well as reducing unemployment rates,” Hope said. — Bloomberg