Hana Insight #26 Global CRE Trends Q4 2020

1) GDP growth for 4Q in each country was different depending on the degree of COVID-19, the IMF raised the forecasted growth rate for 2021

Each country recorded different growth rate by the degree of COVID-19 as GDP growth recorded -1.3% QoQ in France and 0.1% in Germany; however, the US and China's 4Q GDP growth rates were 4.0% and 2.6% respectively. 

In January, the IMF revised its estimates of the economic growth rate in 2021 to reflect each country's fiscal policy and the distribution of vaccines, and adjusted the 2021 global economic growth rate by 0.3%pt. to 5.5%. Among the advanced economies, the IMF adjusted the expected GDP growth rates of the US and Japan by +2.0%pt. and +0.8%pt., respectively.



2) The global CRE private fund raised for 2020 was USD 234 bn, less than half of fund raised in 2019

In 2020, the unfavorable environment such as economic uncertainty and restrictions on physical movement, continued which affected the amount of private fund raised and total investment executed. The total amount decreased by half compared to the previous year.

Due to the sluggish investment activities, the ample amount of dry powder is still around the level of USD 336 bn which implies competition to secure quality real estate assets amongst investors is expected to intensify in 2021.



3) In 2020, CRE transactions in the US, Europe and APAC decreased by 34.6%, 26.0% and 24.4%, respectively

Each region recorded poor transaction performance in 2Q and 3Q, however transaction volume for 4Q in the US, Europe, and APAC increased by 35.7%, 64.3%, and 29.1% QoQ, respectively. Overall, the decrease in global transaction volume in 2020 ended not as severe as expected. 

By sector, the industrial sector, including logistics warehouses, where demand has been increasing significantly since COVID-19, has received intensive attention from the investors. In the US and Europe, transaction volume in this sector declined by 17.6% and 4.1%, respectively, while in APAC, it increased by 4.9%. The industrial sector performed the best in each region.

On the other hand, overall transaction volume fell sharply regardless of the region for the hotel sector, as the transaction volume in the US, Europe, and APAC decreased by 70.1%, 64.9% and 49.9%, respectively.


4) The average of transaction prices per unit declined in the order of hotel, retail, and office sectors

The price per unit of CRE has been differentiated by sector and region. The price adjustments are already underway in the hotel and retail sectors, which have experienced the largest decrease in transaction volume.

In the office sector, prices are being adjusted mainly in some regions where vacancy rates are rising, but the prices of CBD and prime assets remain strong.

Prices of assets for the industrial and multifamily sector continue to be strong as investment demand is focused on these sectors.