Global Real Estate Perspective August 2022
Markets holding up well but headwinds starting to impact sentiment and activity
While effects from the pandemic have receded in most parts of the world other headwinds have appeared and strengthened in the second quarter. Inflation accelerated sharply for a number of reasons including the war in Ukraine, sanctions against Russia, Covid restrictions in China and ongoing supply chain disruptions. This triggered an accelerated tightening cycle by central banks. These are all feeding into heightened uncertainty and are dampening sentiment. Decision-making processes are lengthening as occupiers take a ‘wait and see’ approach. On a positive note, labor markets are continuing to perform strongly and pent-up demand from the pandemic is still helping to support activity. For investors, the increasing cost of debt and inflation are impacting pricing and bidding dynamics around the world.
Global office leasing volumes held stable over the quarter, but this bucks the pre-pandemic trend where the second quarter would usually show an increase on Q1. Additionally, while global net absorption remained positive in Q2 it was down 89% over the quarter. In the logistics sector demand remained strong and is becoming more broad-based as ecommerce occupiers play a less dominant role in the market. Despite the retail sales growth outlook softening, leasing activity in the retail sector remained robust across many mature markets with a particular focus on quality assets.) of that section to ‘Leasing activity in the retail sector was robust across many mature markets despite a weakening sales outlook and rising costs.’
Global Real Estate Health Monitor
Investors in a new phase of price discovery
The impact of the economic climate and rising rates is being felt globally at mid-year in the capital markets, reflected in investor selectivity and the slowing pace of growth in the direct investment markets. During this new phase of price discovery, the bid-ask gap is widening in the transaction market, and bidding intensity is moderating. With that said, the tailwinds supporting the real estate asset class remain intact, and there is no lack of equity or debt market liquidity. Debt markets are liquid, but more cautious amid increased scrutiny on underwriting assumptions. Looking ahead, incremental rate changes will introduce additional price discovery in the markets. However, the continued depth and diversity of lenders and investors is expected to mitigate the risk of a deeper, prolonged impact on capital flows in real estate.
Please download the summary report. The full Global Real Estate Perspective report is available on request, please contact the team below to find out more.
Jones Lang LaSalle (JLL), together with its subsidiaries and affiliates, is a leading global provider of real estate and investment management services. We take our responsibility to protect the personal information provided to us seriously.
Generally the personal information we collect from you are for the purposes of dealing with your enquiry.
We endeavor to keep your personal information secure with appropriate level of security and keep for as long as we need it for legitimate business or legal reasons. We will then delete it safely and securely. For more information about how JLL processes your personal data, please view our privacy statement.
Want to learn more?
Get in touch with our research team to find out how we can support your real estate strategy with market insights and strategic advice.