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Markets & Geopolitics

Global Commercial Real Estate: The state of the sector in three graphs

The quarterly RICS Global Commercial Property Monitor charts sentiment across the sector and has been shown to accurately foreshadow market conditions by over a year. Ahead of the release of the Q3 2021 survey, we review results in the last quarter. Was early-year market optimism sustained, or simply another false dawn?

World Built Environment Forum
28 September 2021

After two consecutive quarters of growing, albeit cautious, optimism, the results of the Q2 2021 Global Commercial Property Monitor suggest that the sector is in full recovery mode.

Perceptions on Phase of the Cycle

Perceptions on Phase of the Cycle

Nearly half of all respondents consider the market to be upturning, marking a ten-point jump in sentiment. By a similar token, roughly a quarter of participants now feel the market to be downturning, down from two-in-five in Q1. The percentage of respondents who believe the market to have either bottomed or peaked has remained virtually unmoved since Q4 2020. Taken together, these results suggest that the recovery is taking root and the cautious optimism of previous quarters may be blooming into bullishness.

Global Capital Value Expectations by Sector

Global Capital Value Expectations by Sector

Data centres continue to have their moment as the quintessential Industry 4.0 asset class, with only Prime Industrial expected to fare better over the coming 12 months. Multifamily also continues to perform well, as predicted by Martin J Brühl, Chief Investment Officer at Union Investment Real Estate during a WBEF webinar back in May 2021. Perhaps most notable of all the results is the growth in optimism around the hotels sector. Back in Q1, the expectation was for a circa four-point dip in values; one quarter on and the market now expects values to hold solid. The continued easing of global travel restrictions, combined with an army of consumers seeking to burn some dry powder could well lead to happier times in the hospitality sector. All the same, not everyone is convinced by the “new roaring twenties” theory. It will be news to few that prospects in the secondary retail sector remain bleak.

Global Commercial Property Sentiment Index

Global Commercial Property Sentiment Index

Overall sentiment has moved back into positive territory in the Americas, the first time that respondents in any region have expressed such buoyancy since the pandemic hit. But the index continues to climb in every part of the world, with net balance of attitudes in Asia Pacific and Europe climbing back into single-digit negative territory. If the surge in sentiment remains consistent, they could be touching net positive territory in Q3. And while attitudes in the Middle East and Africa lag the rest of the world, they are approaching their pre-pandemic levels. It seems that, in every corner of the globe, the COVID-19 gloom is lifting.