Top Global Investors Pivot Away from Office, Toward Industrial
Despite a reduction in transaction volume, the top global investors in commercial real estate commercial real estate in 2020 collectively added $65.4 billion of assets to their portfolios last year, writes Jim Costello at Real Capital Analytics. If they bought less—this total was down 22% from 2019—then they also sold less, for a net gain.
“There are clear signals in what they bought, however, that these investors are reacting to the uncertainty presented by the COVID-19 turmoil,” writes Costello. “Net purchases by property sector indicate that concerns about the office sector surfaced in 2020.”
The industrial sector was in the lead for 2020, both in absolute dollar terms and in a relative sense, Costello writes. Industrial posted only an 11% drop off in the pace of net investment relative to 2019.
“The apartment sector posted only a 16% decline in the pace of net investment,” writes Costello. “With these top investors adding $14.5 billion more in apartment assets to their portfolios than they sold for the year however, interest in this sector surpassed that for the office sector in 2020. These players added only $11.3 billion more office assets to their portfolios than they sold for the year, a 49% pace of decline from 2019.”
Interestingly, while the top global investors were net sellers of retail in 2020, they sold fewer assets n this sector than they did in 2019. “The biggest investors worldwide are not necessarily the most active buyers and sellers,” Costello writes.
Some of the top 100 investors have large holdings, and focus “more on steady, prudent management of income rather than dealmaking,” he continues. “Still, by looking at these changes in their appetite for deals, it is clear that these investors are rotating away from offices.”
Dealmaking fell in 2020 both because of the uncertainty around the future path of the pandemic and because of the physical challenges of bringing together buyers and sellers and completing paperwork. Assuming that the physical impediments to dealmaking were the same across all property sectors, “then differences in deal activity should represent the degree of uncertainty for the future,” points out Costello.
“The fact that net acquisitions fell more for offices than in other property sectors is a signal that the top global investors are more concerned about the future performance and current pricing of offices.”
Pictured: A property in an Iron Mountain portfolio Blackstone Real Estate Income Trust acquired in 2020.
Paul Bubny serves as Senior Content Director for Connect Commercial Real Estate, a role to which he brings 13-plus years’ experience covering the commercial real estate industry and 30-plus years in business-to-business journalism. In this capacity, he oversees daily operations while also reporting on both local/regional markets and national trends, covering individual transactions across all property types, as well as delving into broader subject matter. He produces 15-20 daily news stories per day and works with the Connect team and clients to develop longer-form content, ranging from Q&As to thought-leadership pieces.
Prior to joining Connect, Paul was Managing Editor for both Real Estate Forum and GlobeSt.com at American Lawyer Media, where he oversaw operations at both publications while also producing daily news and feature-length articles. His tenure in B2B publishing stretches back into the print era, and he has served as Editor in Chief on four national trade publications.
Since 1999, Paul has volunteered as the newsletter editor of passenger rail advocacy groups (one national, one local).
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