Investors with strong liquidity begin to see opportunity to
deploy across the capital stack with a top focus on credit
strategies and sector diversification
CHICAGO, Jan. 11,
2024 /PRNewswire/ -- Clarity across markets has been
in short supply recently but signs that investors are starting to
reengage through a broader set of strategies are beginning to
emerge. By the end of 2025, $3.1
trillion of real estate assets globally will have maturing
debt, according to JLL's Global Capital Outlook research. The
current refinancing shortfall for these loan maturities is an
estimated $270-$570 billion, which will catalyze transaction
activity and provide a clear first-mover advantage for well
capitalized investors in 2024.
Currently, substantial liquidity exists, with dry powder for
commercial real estate (CRE) totalling $402
billion sitting on the sidelines. However, a clearer picture
is already emerging as real estate has seen a growing number of
bidders re-enter the market according to JLL's proprietary Bid
Intensity Index. This movement is being driven particularly by
activity from private investors and select institutional capital
with the U.S. being furthest along in its price adjustment cycle,
followed by Europe and
Asia Pacific.
JLL's proprietary Bid Intensity Index shows improved market
trends since year-end 2022, despite the late summer run up in bond
yields. Bidding activity was on the rise in late 2023, with the
average number of bids per deal increasing by 16%, narrowing the
bid-ask spread.
"This reset in values will both challenge capital and catalyze
liquidity," said Richard Bloxam,
CEO, Capital Markets at JLL. "There is absolutely uniform
understanding that pricing has changed. Given the quantum of
dry powder, there will be a considerable first-mover advantage for
capital that can deploy quickly and mobilize around opportunities
as market fundamentals improve."
While the current nature of the markets remains fragile – as
evidenced by the recent volatility in bond yields – the long-term
attractiveness of CRE investments remains largely intact. From a
10-year return perspective, real estate has held up consistently
well against other asset classes.
"In our view, while the current higher-rate environment has
created a cooling effect on real estate's attractiveness in the
short-term, strategic allocation targets into real estate are
expected to remain stable and, in some cases, trend higher,
especially in the long run," noted Bloxam. "We anticipate this will
materialize initially in sectors, such as living and logistics, and
in markets with strong rental growth expectations where values also
appear to be bottoming out."
As was the case for many trends, the COVID-19 era was an
accelerant, but not a catalyst for portfolio diversification
strategies – which began shifting in the decade leading up to the
pandemic. Collective exposure to the logistics and living asset
classes across the largest core funds has grown by $138 billion, an increase of 263%, since 2016.
These sectors now account for around 62% of core fund exposure in
the U.S, 52% in Asia Pacific and
46% in Europe.
"While we will continue to see this reallocation of capital as
investors reengage with the market, it's important to note that it
is more about diversification of portfolios than wholesale shifts,"
said Bloxam.
Bloxam expects to see growth in emerging sectors as well.
"Looking beyond these more established sectors, alternative assets
should also be in focus for investors. Technological and societal
changes will create longer term opportunities in areas such as
renewable energy, infrastructure and advanced manufacturing, to
name a few."
About JLL
For over 200 years, JLL (NYSE: JLL), a
leading global commercial real estate and investment management
company, has helped clients buy, build, occupy, manage and invest
in a variety of commercial, industrial, hotel, residential and
retail properties. A Fortune 500® company with annual revenue
of $20.9 billion and operations in
over 80 countries around the world, our more than 105,000 employees
bring the power of a global platform combined with local expertise.
Driven by our purpose to shape the future of real estate for a
better world, we help our clients, people and communities SEE
A BRIGHTER WAYSM. JLL is the brand name, and a
registered trademark, of Jones Lang LaSalle Incorporated. For
further information, visit jll.com.
Contact: Abigail Goldsbrough
Phone: + 447902115887
Email: abigail.goldsbrough@jll.com
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SOURCE JLL