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Real estate investment drops 70% but the recovery should be "strong"
14 April 2020 |

Global real estate investment’s drop caused by the Covid-19 crisis is already being felt: in March, the world market fell 70%. But the second semester of 2020 should be marked by a «strong» and «quick» recovery.

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This is one of the forecasts from consultant Colliers International, which further advanced that this recovery will be faster than the recovery after the world financial crisis.

According to the consultant, there are lights of hope, despite the expected global recession. Data from Oxford Economics shows that after a 1.8% world GDP quarterly contraction during the first quarter and a new 0.3% drop expected for the second quarter, growth should reach around 1.5% in the third and 1.8% in the fourth quarter.

Mikel Echavarren, CEO at Colliers in Spain, commented that «this level of commotion in the world markets has no precedent and we see an overall effect all over the world. The GDP drop has many causes, such as the travel restrictions implemented globally, the oil prices’ drop and the volatility of the Stock Exchanges. The good news is that an upturn will take place soon and the recovery is expected to be strong».

Colliers points out that the global annual investment volumes for commercial assets have been generally increasing since the financial crisis, having reached in 2018 record numbers of 1.8 billion dollars and 1.7 billion dollars in 2019. This year, investment was struck with the preliminary results for the month of March which indicate a 70% global drop, reaching 48.000 million dollars, below the 144.000 million dollars reached in March 2019. The 250.000 million dollars invested during the first quarter, represented the lowest investment volume since the second quarter of 2012.

There have been positive elements in some markets during the first quarter, such as in Germany, Italy, the United Kingdom and Spain.

Upturn during the third and fourth quarter

Colliers’ econometric model suggests that global investment volumes will be at a level similar to the numbers of the first quarter. Although China’s activity is recovering, many parts of the World remain under emergency states and as such commercial activity will remain low in the coming weeks. Nevertheless, the model predicts a considerable upturn during the third and fourth quarters, with world levels returning to the numbers shown before the COVID-19 crisis.

Jorge Laguna, Business Intelligence Director pointed out that: «it is impossible to predict on the short-term the evolution of commercial assets’ transactions due to the changing nature of the COVID-19 crisis, but at Colliers we believe that there are good reasons to be cautiously optimistic. Governments and central banks reacted much quicker and on a much larger scale than they did to the financial crisis almost a decade ago; investors will want to diversify their portfolios. The Colliers model predicts a considerable upturn during the second semester after a short recession, however, it is based on an actual prediction of a strong economic recovery during the second semester and this requires some caution».