New research from JLL illustrates that European real estate investment volumes have recovered in the third quarter of 2020, following what the firm calls 'the sharpest decline in recent history'.
While European Q3 transaction volumes were still deeply impacted by the pandemic, falling 24% year-on-year, the quarter marked an improvement from the 32% contraction experienced in the second quarter.
This also compared favourably with the global picture, where activity fell by 44% in Q3, compared to 51% in Q2.
Beds and sheds
Across Europe, year-to-date volumes declined by a muted 17% largely due to a strong Q1 2020, with rising allocations to the logistics and living sectors accounting for a combined 39% of quarterly transactions.
In Europe, the logistics sector saw volumes rise 19% y-o-y with the sector benefitting from an increased reliance on delivery platforms and online retail. Living remains popular with investors given favourable demographics, the increased role of the home and highly diversified income streams. In aggregate, year-to-date residential volumes outperformed the overall market, increasing 5% y-o-y, the research said.
'As we approach the end of an uncertain year, transaction pipelines are rebuilding globally and are offering a sense of optimism. Real estate investors will remain cautious and calculated in their approach while opportunistic and private/high-net-worth investors are poised to capitalize on market fragmentation while institutions remain critical of pricing,' said Sean Coghlan, global head of Capital Markets Research, JLL.
Global trends
While activity has picked up, investors are being forced to pivot their strategies, the JLL report suggested. Ongoing travel restrictions continued to hamper plans for cross-regional deployment, accounting for just 8% of global activity in the third quarter; the lowest level since the global financial crisis.
On the other hand, domestic and intra-regional investments are accounting for a greater share of activity with the share of intra-regional activity climbing to 14%, the highest rate in more than a decade.
Global logistics investment increased 47% from the second quarter, declining by a relatively moderate 21% year-to-date. Investment into the sector now accounts for up to a third of overall activity in each region.
