Global property consultant CBRE is reporting that worldwide commercial real estate investment increased by 84% quarter-over-quarter in Q4 to $290 billion but was down by 20% from Q4 2019. The surge between Q3 and Q4 2020 was mainly driven by a 97% increase in U.S. volume. Nevertheless, annual global investment was down by 26% from 2019 because of the pandemic.
The Q4 rebound was significant in all three global regions, as the promise of vaccine deployment and continued economic recovery buoyed investor sentiment. Despite a resurgence of COVID infections in parts of the world, Q4 performance is grounds for an optimistic outlook for 2021.
EMEA investment surged 84% in Q4 from Q3 to $109 billion, down by 25% from Q4 2019 and by 12% from the five-year Q4 average. Record-setting volume in Q1 lifted the annual total to $329 billion, a 17% decline from the prior year that was the smallest of all three regions.
Q4’s quarter-over-quarter increased volume was mostly attributable to Germany, U.K. and the Netherlands. However, on a year-over-year basis, Germany’s Q4 volume fell by 30%, the U.K.’s was down 20% and the Netherlands had a 10% increase. Denmark, Switzerland and Norway exhibited remarkable resilience throughout 2020, ending the year above their 2019 volumes. Looking ahead, recent reintroductions of lockdown measures may weigh on investor sentiment in early 2021.
Capital is increasingly being allocated to multifamily and industrial assets in the region. Combined, they accounted for 38% of total EMEA investment in 2020, up from 30% in 2019 (Figure 2). Multifamily investment grew 7% and industrial by 11% in 2020. Investors accepted low yields in both sectors for potential rent growth and low risk in these uncertain times.
Office and retail investment volume recovered in Q4, growing by 77% and 67%, respectively, from Q3. On an annual basis, however, their volumes fell by 34% and 5%. The Q4 office rebound was particularly evident in the U.K. and Germany, focused on core assets, as employment growth gained momentum. Retail investment is expected to remain stable at low levels. The hotel sector was down 66% in 2020. Investors anticipate more distressed sales in 2021.
