Accommodation block in Warsaw, Poland
Bus at photography | Moment | Getty images
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After withdrawing from commercial real estate activity earlier this year due to a broad economic uncertainty, there are new signs that activity is again in motion.
Capital increases and the “tenderers’ dynamics” is stabilized, according to the global JLL auction intensity index, which experienced an improvement in July – its first since December.
The index measures the activity of the auctions in order to give a real -time vision of liquidity and competitiveness on the private real estate markets. It is in turn an indicator of future capital flows through investment sales transactions.
It is made up of three sub-indices:
- Spread Bid-Ask: final winner offer against the requested price
- Offers by agreement: Average number of offers per transaction
- Variability of offers: Variability of prices for final offers
The stabilization of the auction dynamics occur while the performance fundamentals in the real estate sector are maintained and the asset assessments have generally held firmly this year, despite the feeling of lower investors, according to the report.
“No lack of liquidity, institutional investors return to the market with more capital sources and a renewed appetite for real estate,” said Ben Breslau, research director at JLL. “Although the continuation of recovery should be progressive after having moderated earlier this year, borrowing costs and real estate values on most of the markets have stabilized, we therefore expect the momentum to take the second semester.”
BID-AK spreads, the difference between the highest price that a buyer is willing to pay for an asset and the lowest price that a seller is ready to accept, shrinks at healthier levels in several sectors. The sector that sees the most improvements is so-called “life”, which is largely multifamilial apartments but also includes life for the elderly and student housing.
The retail trade is better than last year, but has declined in recent months, because the prices weigh heavily in this sector. The industry is the greatest delay, thanks to the uncertainty of the supply chain, also muddy by potential and real prices.
Office Bid Dynamics displays an improvement, driven by an increasing number of bidders and more lenders citing office loans. Some called a background on the offices after its accident induced by Covide. Investors are business hunting in some cases, but as fundamentals are more reinforced with the office, the overall demand for agreements increases.
Conclusion: Investors seem to accept uncertainty as a normal new, according to the JLL report. Breslau said it includes acceptance of a higher risk.
“The attractiveness of CRE investments as a long-term reserve of value remains intact. While more and more investors are switching to an” risk “mode, coupled with exceptionally strong debt markets, we expect it to lead to continuous growth in capital flows,” he said.
Fixed: This article has been updated to correct a reference to Ben Breslau, research director at JLL.