GLOBAL BRIEF | Intelligent Investment

Robust Q3 Volume Puts

2021 Global Investment
on Par with 2019

CBRE RESEARCH | OCTOBER 2021

Executive Summary

 Global commercial real estate investment volume grew by 95% year-over-year

in Q3 to US$315 billion, bringing the year-to-date total to US$800 billion—up
by 3% from the same period in 2019.
  
 Investment in all three global regions—Americas, EMEA and Asia-Pacific—was
on par with 2019 levels, driven by economic recovery amid the rise in COVID
vaccinations. 
  
 Demand for multifamily and industrial & logistics assets significantly drove
investment growth in Q3. The office, retail and hotel sectors are showing
upside potential for investment beginning in Q4. 

Global

With nearly half of the world’s population vaccinated and COVID delta variant
infections subsiding, global GDP is on track to reach pre-COVID levels by year’s end.
With ample liquidity and global bond yields low despite higher inflation, investors
eagerly deployed capital to commercial real estate in Q3, putting 2021 on pace for
record annual investment volume.
   
Global investment volume grew by 95% year-over-year in Q3 to US$315 billion. All
three global regions—Americas, EMEA and Asia-Pacific—reported strong investment
activity that was on par with 2019 levels. On a year-to-date basis, global volume
exceeded that of 2020 by 44% and 2019 by 3%. 
  
Investor interest in the multifamily sector, especially in the U.S., Germany and
Sweden, significantly drove investment volume growth in Q3. Industrial & logistics
property acquisitions remained popular across regions. Office and retail investment
volumes are still recovering but the value resilience of high-quality assets suggests
improving market conditions.  

FIGURE 1: Global Commercial Real Estate Investment Volume (US$ Billions -

Fixed)

Source: CBRE Research, Real Capital Analytics, Q3 2021.

Americas

Americas investment volume continued to show remarkable strength in Q3 2021, led

by the U.S. multifamily sector. The region’s total investment volume surged by 152%
year-over-year in Q3 and by 74% year-to-date. Excluding entity-level transactions,
investment volume grew by 141% year-over-year. Compared with the pre-COVID
trend, the accelerated growth of Sun Belt markets has offset a shortage of large-ticket
office transactions in gateway markets so far this year, but the comeback of trophy
office sales is highly anticipated and critical for a full recovery of commercial real
estate investment.
  
The multifamily sector’s share of total Americas volume rose to 39% in Q3 from an
average of 28% between 2015 and 2019. Sun Belt markets led by Dallas, Atlanta and
Phoenix had a boom in population and employment growth that led to significant
capital inflows over the past 12 months.
  
Meanwhile, after two years of exceptional performance, the industrial sector showed
some signs of easing back, as its share of total volume dropped to 23%. The industrial
sector is expected to stay healthy on the back of e-commerce and manufacturing
 growth, but investors are becoming more selective in the face of record-low cap rates.
  
Hotel sales have recovered well in the past six months, driven by coastal markets and
portfolio acquisitions. With easing travel restrictions, domestic and international
tourism should support a further rebound of service-based retail and hospitality.
  
The office sector’s share of total investment volume dropped to a new low of 19% in
the region. Retail’s share fell to 9%. Delayed returns to the office and a potential
cultural shift toward flexible working have caused investors to mainly focus on
stabilized core assets. Office cap rates, albeit based on fewer trades than normal, were
largely on par with pre-COVID levels. In the retail sector, cap rates fell for grocery-
anchored shopping centers. Suburban assets outperformed urban assets, mainly driven
by higher returns.

FIGURE 2: Share of Investment by Property Type (Trailing 12 Months, Fixed

FX)

Source: CBRE Research, Real Capital Analytics, Q3 2021.

EMEA

Economic reopening and a reduction in COVID infections, particularly in Europe, have

restored investor confidence and returned EMEA investment volume to its pre-COVID
trend. The region’s total volume grew by 56% year-over-year in Q3 to US$94 billion.
Year-to-date investment volume grew by 10% over the same period in 2020 and was
on par (-2%) with 2019.
  
Sweden (186%), Netherlands (126%), Germany (96%) and the U.K. (68%) led the
year-over-year rebound in Q3, primarily driven by a fast-growing
multifamily/residential sector, including a US$10.6 billion (€9.1 billion) residential
portfolio acquisition by Heimstaden across Germany and the Nordics. The U.K.’s
industrial sector also attracted a large amount of capital from cross-border investors.
  
The multifamily and industrial sectors’ share of total EMEA investment volume reached
27% and 19%, respectively, in Q3. Both sectors received a significant boost from the
pandemic as capital moved primarily toward these two outperforming sectors. Markets
in Germany, Sweden and Netherlands have matured with increased multifamily supply.
The U.K. and other markets are expected to follow, driving further growth across the
continent. Investor appetite and user demand for industrial properties remained strong
due to e-commerce growth.
  
The office sector’s share of total investment dropped to 31% from roughly 40% pre-
COVID, due to lingering uncertainty on office usage. But it still had the highest share
of all sectors, as rental rate growth resumed in Tier I markets and occupiers started to
return and make leasing decisions.
  
Despite a continued decline in retail investment volume, a rebound appears likely in
coming quarters based on the relatively low pricing of retail assets. An uptick in hotel
investment in Q3 implied the worst was over for the sector, with very few distress
sales.

Asia-Pacific

Asia-Pacific’s investment volume grew by 24% year-over-year in Q3 to US$34 billion.

Year-to-date volume stands at US$102 billion, up by 41% from the same period in
2020 and exactly on par with the comparable 2019 level. The ongoing supply-chain
disruption and rising commodity prices have affected the region’s economic outlook,
which will likely dampen investment volume in 2022.
  
Hong Kong (354%), Australia (121%) and Japan (89%) led the year-over-year growth
in Q3. In Japan, the US$2.5 billion sale/leaseback of Dentsu’s headquarters office
echoed a global trend of corporate occupiers moving owned real estate off their
balance sheets. Other major office markets like Seoul, Shanghai, Melbourne and Hong
Kong also performed well in Q3. Besides trophy assets, secondary offices in prime
locations with the potential for upgrading or repositioning are also attracting interest
based on flight-to-quality demand from occupiers. The office sector’s share of total
Asia-Pacific investment volume remained close to 50%.
  
Industrial’s share of total investment fell slightly quarter-over-quarter to 21% in Q3,
but remained well above the 2015-2019 average of 13%. Almost all countries
experienced strong growth during the pandemic, especially Australia and Mainland
China. Strong investor demand accelerated cap rate compression in core assets and
prompted investors to move up the risk curve.
   
 The retail and multifamily sectors each accounted for roughly 10% of total investment
with an upward trend in Q3. Hotel investment has yet to pick up, waiting for a broader
lift of travel restrictions. These sectors serve as potential upside for Q4 and next year,
as capital will seek counter-cyclical opportunities amid the tight yield environment.

Forecast

Global commercial real estate investment is poised for a strong Q4 and a record year
in 2021. Strong momentum continues for multifamily and industrial investment, while
retail and hotel investment is expected to rebound with increased international
mobility. The highly anticipated office recovery is taking place in suburban markets,
with urban markets likely to follow next year.
  
CBRE estimates that annual global investment volume will increase by roughly 28% in
2021 and, due to a strong base, by a more moderate 8% in 2022. 

FIGURE 3: Total Value of Commercial Real Estate Investment Transactions

(US$ Billions)1

 
Source: CBRE Research, Real Capital Analytics, Q3 2021.
1 Values include entity-level transactions and exclude development sites.
2 In order to calculate global totals, local currency values are converted to US$ using the most recent quarterly FX rates of Q3
2021. This calculation eliminates currency impacts over time and generates the same growth rates as in local currencies.

Appendix

The seasonally adjusted volumes are shown in Figure A1. These give a more accurate
picture of transaction activity from quarter to quarter across any one year. 

FIGURE A1: Seasonally Adjusted Investment Volume (US$ Billions - Fixed)

 
 
 

 
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