The International CRE View: Mixed Conditions, Improving Outlook

Even amid a murky economic picture, JLL’s recently released Global Real Estate Perspective—Highlights paints an optimistic outlook. While the international economic outlook is still mixed, “growth has proved to be resilient with forecasts revised up as the year progressed,” the JLL report authors commented.

Capital Flows

The perspective indicated that, while interest rate uncertainty is still an issue, overall investor sentiment improved mid-year. Additionally:

• Interest rates. Many of the largest markets anticipate easing monetary policies by the end of the year, though there is still confusion about “the timing of interest rate shifts and geopolitics.” Still, momentum is anticipated to increase, with “early signs of an inflection point in real estate markets.”

• Pricing. Pricing continues to stabilize in most global markets, with bidder activity increasing and more realistic pricing baked into negotiations. “Pricing is now stabilizing at levels observed since the start of the year,” the report said, with early signs of yield compression apparent in parts of the U.S., Asia, and Europe.

• Debt markets. Debt market conditions are also improving, thanks to more clarity on pricing and spread compressions during 1H 2024. Said the report: “Lender confidence remains varied and is strongest for in-demand sectors.” Still, loan workouts and refinancing continue to be a focal point.

Property Sectors

The report also focused on global property sectors, pointing out the following trends:

• Office. Gradual demand recovery in the office sector continues, as leasing volumes trended 10% above the same time last year. While stabilizing hybrid work policies contributed to leasing activities in the U.S. and Europe, cost concerns and lower availability damped the numbers in the Asia Pacific.

• Industrial/Logistics. Leasing volumes in the EMEA and Asia Pacific industrial/logistics properties increased but stalled in North America. Record-high deliveries in all areas led to a boost in vacancy rates. Additionally, “occupiers are continuing to exercise caution when making leasing decisions,” the report said.

• Retail. Despite a softening of retail spending growth, ongoing consumer demand continues to drive strength among the storefronts. The report forecasts that retail spending in mature markets could increase in 2H 2024, “driven by the return of rising real disposable incomes, international tourism and an anticipated increase in economic activity.”

• Residential. The global living investment market continues to strengthen. Large transactions occurred in the U.S. and Europe, while “EMEA living investment nearly doubled its Q1 figure,” the report said. Though the Asia Pacific investment volumes were lower than the other regions, the report said it had increased from the previous quarter.

• Hospitality. Global hotel RevPAR remained high through much of the first half of 2024, with demand normalizing in multiple markets. The mainstay of the growth is business travel and growing international demand, but resorts and leisure destinations fell precipitously. The exception is the European RevPAR, which the report authors believe will increase “driven by the Paris Olympics, which is anticipated to generate record demand for the city and surrounding markets.”