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Global Real Estate Investment Plunges Amid Covid Pandemic

The Asia-Pacific region took the biggest hit, with volumes down 45 percent.

(Bloomberg) -- Global real estate investment fell by 33% in the first half as the coronavirus pandemic battered economies and disrupted deals.

The Asia-Pacific region took the biggest hit, with volumes down 45% from the year-earlier period, because it was the first struck by the outbreak, according to a report from broker Savills Plc. Investment dropped by 36% in the Americas and 19% in Europe, the Middle East and Africa.

Investment is “expected to remain well below pre-pandemic levels for the rest of 2020 as investors wait for market clarity,” Simon Hope, Savills head of global capital markets, said in a statement on Monday. “However, certain sectors are expected to outperform as investors focus on secure assets, namely logistics, residential and life sciences.”

The global economy has been hammered by the pandemic, with the International Monetary Fund forecasting a 4.9% contraction this year. IMF chief economist Gita Gopinath has said the cumulative loss for the world economy this year and next as a result of the recession is expected to reach $12.5 trillion.

Still, the investment decline was less severe than at the start of the last financial crisis in the first half of 2008, when investment cratered by 49% and kept falling until the middle of 2009, Sophie Chick, director of Savills World Research team, said in the statement.

With the tourism industry shut down for months by government lockdowns, hotels saw investment decline by 59% in the first half of the year, followed by a 41% drop for retail properties, according to the Savills report. Industrial and residential properties fared better.

Among the few bright spots in the Savills report was a 105% increase in Asian residential real estate investment, driven by Blackstone Group Inc.’s deal to buy a collection of Japanese apartments from Anbang Insurance Group for close to $3 billion, according to the report.

The U.K. and other major countries have indicated that they intend to boost spending on infrastructure projects to help lift their economies out of recession. Prime Minister Boris Johnson, for example, has said his government plans to “build, build, build” to drive growth.

“This generally bodes well for the real estate industry, as it potentially creates more assets to invest in as well as reducing unemployment rates,” Hope said.

(Updates with Savills comment in final paragraph)

To contact the reporter on this story:
Todd Gillespie in London at [email protected]

To contact the editors responsible for this story:
Shelley Robinson at [email protected]
Patrick Henry, Marion Dakers

© 2020 Bloomberg L.P.

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