Advertiser Disclosure

advertising disclaimer
Skip to main content
Tall buildings under construction

Real Estate Investment Down As Investors Remain Cautious

[Updated: Jul 27, 2020 ] May 18, 2020 by Brad Cartier
Get our 43-Page Guide to Real Estate Investing Today!

Real estate has long been the go-to investment for those looking to build long-term wealth for generations. Let us help you navigate this asset class by signing up for our comprehensive real estate investing guide.

*By submitting your email you consent to us keeping you informed about updates to our website and about other products and services that we think might interest you. You can unsubscribe at any time. Please read our Privacy Statement and Terms & Conditions.

Late last week JLL released new data showing that global investment in commercial real estate has dropped by 5% year over year as of the first quarter of 2020. This is despite there being substantial liquidity sitting on the sidelines. JLL expects this trend to reverse course given the longevity and diversification benefits of the real estate sector.

Outside of direct investment, real estate investment trusts (REITs) have also seen a downward trend in the first quarter of 2020. According to Sean Coghlan, Head of Global Capital Markets Research at JLL, "Credit and equity markets were among the first to react, with REITs the first in our industry to experience the negative impacts of COVID-19." In the world's largest REIT markets, JLL found that total returns for the first quarter of 2020 fell by an average of 31%.

Coghlan continues that "despite ample liquidity in debt markets, lenders remain in a phase of 'price discovery' and are focused on asset-managing their existing portfolios. This has led to a greater scrutiny over leverage, and a focus on experienced sponsors, resilient sectors, and strong locations in quoting new deals."

In the short term, investors have been seeking out defensive strategies to weather the ongoing pandemic, according to JLL's research. JLL expects real estate with exposure to technology, warehousing, supply chains, apartments, and industrial to perform better than other sectors such as commercial, retail, and hospitality. Investment in multifamily, for instance, is down only 1% year over year in the first quarter of 2020.

Coghlan highlights that multifamily "is considered one of the more resilient sectors, underpinned by the demographic shifts we have witnessed over the past couple of decades. As more people move toward cities and space and affordability become an issue, demand for purpose-built rented accommodation is growing."

Indeed, May rent data for the apartment sector showed increasing signs of optimism. The National Multifamily Housing Council (NMHC) reported that May rent collection sits at 87%, which was 2% higher than at the same time in April 2020. Further, May rent collection is currently only 2% lower than what it was this time last year.

For now, investor caution appears to center more around specific real estate asset classes on the general uncertainty surrounding the pandemic. As countries slowly loosen stay-at-home and social distancing orders, look for investor caution to subside, particularly given the substantial liquidity available.

Unfair Advantages: How Real Estate Became a Billionaire Factory

You probably know that real estate has long been the playground for the rich and well connected, and that according to recently published data it’s also been the best performing investment in modern history. And with a set of unfair advantages that are completely unheard of with other investments, it’s no surprise why.

But those barriers have come crashing down - and now it’s possible to build REAL wealth through real estate at a fraction of what it used to cost, meaning the unfair advantages are now available to individuals like you.

To get started, we’ve assembled a comprehensive guide that outlines everything you need to know about investing in real estate - and have made it available for FREE today. Simply click here to learn more and access your complimentary copy.

The Motley Fool has a disclosure policy.