Commercial investment volume increased by 34% year-over-year in Q1
According to new data by CBRE, global commercial real estate investment volume increased by 34% year-over-year to $282 billion in Q1 2022. Investment was up by 47% in the Americas, 25% in EMEA and 5% in Asia-Pacific. Note that all investment totals and percentage changes cited in this report are in U.S. dollars.
Multifamily was the largest sector for the sixth straight quarter, with investment totaling $76 billion in Q1--up by 18% from a year ago. Office overtook industrial & logistics for the second most volume in Q1 at $82 billion, a 44% increase from Q1 2021. Industrial & logistics volume grew by 41% year-over-year in Q1 to $61 billion, while the retail sector had the highest year-over-year growth rate (65%) for a total of $33 billion.
Americas volume up by 47%
CBRE says that despite high inflation and rising interest rates in the U.S., commercial real estate investment volume in the Americas increased by 47% year-over-year in Q1 to $160 billion.
The multifamily sector accounted for $58 billion or 40% of total Q1 investment volume in the Americas, up by 40% from the same period last year. Markets with the most multifamily investment volume in Q1 were Dallas ($4.9 billion), New York ($4.1 billion) and Los Angeles ($3.7 billion).
The industrial & logistics sector had $36 billion or 22% of total Americas' Q1 investment volume, up by 50% year-over-year. Although single-asset sales slowed slightly in Q1, entity-level and portfolio transactions helped to boost total investment volume. Assets with below-market rental rates and leases that are rolling over in the near term are seeing the strongest investor demand as strong fundamentals are providing an opportunity to achieve outsized returns in the near-term from the mark-to-market perspective.
The office sector accounted for $35 billion or 19% of total Q1 investment volume in the Americas, an increase of 52% from Q1 2021. When excluding entity-level transactions, office surpassed industrial & logistics for the second most Q1 investment volume.
Accounting for 10% of total Q1 investment volume, the retail sector had a 79% year-over-year increase to $18 billion. Retail's investment outlook this year looks good, with many entity-level and portfolio transactions in the pipeline.
Office sector leads Q1 surge in European investment
European investment volume increased by 25% year-over-year in Q1 2022 to $93 billion, says CBRE.
Office investment volume increased by 73% to $34 billion. Investors were particularly focused on prime assets that meet sustainability standards. Lower-quality assets have been harder to assess, as investors try to ascertain the amount of investment required to bring the buildings up to sustainability standards.
Industrial & logistics investment volume totaled $20 billion in Q1, up by 41% from Q1 2021. Notable Q1 2022 volumes and year-over-year increases were recorded in Norway ($1.8 billion, +969%), Spain ($1.1 billion, +391%), Germany ($5.0 billion, +108%) and Italy ($752 million, +89%). Investor interest in the sector is being driven by rent growth from low vacancy rates and strong e-commerce demand.
Retail investment volume increased by 56% year-over-year in Q1 to $11 billion. Norway and France had their highest Q1 retail investment volumes ever. Consumer spending was buoyed by easing COVID-related mobility restrictions.
Multifamily investment volume fell by 23% year-over-year in Q1 to $18 billion. The slowdown was largely due to a lack of for-sale assets.
Drop in Asia-Pacific office & industrial volumes offset by increase in retail volume
Asia-Pacific investment volume increased by 5% year-over-year in Q1 to $29 billion.
Office investment volume fell by 7% to $15 billion but is expected to increase later this year as occupancy levels begin to recover. Australia, Singapore and Korea accounted for 57% of total Q1 office investment in the region.
Industrial & logistics investment volume was down by 2% year-over-year in Q1 to $5 billion. Solid market fundamentals and competition are expected to lower prime logistics yields in the coming months, although the rising cost of financing will limit any such movement in major markets such as Australia and Korea.
Retail investment volume totaling $4 billion in Q1 2022 was up by 46% year-over-year. As borders gradually reopen and COVID infections decline, investors are adopting a more realistic view of pricing as there are not many distressed properties available.
Rising commodity prices and supply chain disruptions amid strong consumer demand have fueled inflation across the globe. As central banks tighten monetary policy, higher interest rates and greater economic uncertainty will likely weigh on investment volume. CBRE forecasts that total global investment volume this year will be about 2% less than the record volume in 2021. EMEA is expected to see the biggest decline (-5%), largely offset by growth in Asia-Pacific (+5%). Americas investment volume is expected to fall by about 1% from 2021 levels, concludes CBRE.