Mounting evidence suggests that global economic growth contracted in Q1, marking the first quarter of contraction in 11 years. Although lock downs are still in place across many parts of the world, some economies are now gradually starting to reopen. China was the first to emerge, while some European countries and U.S. states are now taking tentative steps to emerge, although timelines remain vague.
To help moderate the impact of the pandemic, several central banks have implemented a ‘whatever it takes approach’; at the same time, many governments have announced large fiscal stimulus programs. Global economic growth should resume in the latter half of the year. But because so much centers on the health situation, a multi-speed recovery around the world seems likely.
Against the backdrop of broader market volatility and uncertainty, direct investment in global commercial real estate dropped by 5% year-on-year in the first quarter, falling to US$200 billion. Performance varied across the regions, with capital flows generally tracking the evolution of the pandemic. Areas hit first saw declines in transaction volumes, but the impact has not fully filtered into the data for markets which were later exposed in the quarter.
Defensive sectors are coming to the fore. As investors increasingly look to income stability, operation criticality and occupation density as key arbiters to asset-level risk, sectors such as industrial, multifamily and data centers are expected to benefit. Global industrial volumes rose by 7% in the first quarter, while multifamily largely maintained its performance relative to a very strong Q1 2019.