Global Real Estate Perspective May 2024

The global economy’s resilience continued in the first quarter of 2024, despite geopolitical uncertainty and shifts to the interest rate outlook. Growth remains subdued by historic standards, but as inflation eases further and the timing of policy rate reductions becomes clearer, momentum should build through the second half of the year and into 2025.  

Signs of a continued gradual improvement in activity were evident in office markets, with global leasing volumes rising by 7% from the previous year. In the logistics sector fundamentals cooled across regions during the quarter as occupiers remain cautious, although the outlook for the full year is positive, with rising inquiries in major markets. Robust retail and hospitality demand has carried over into early 2024, boosted by growing international travel and rising real wages. 

Investor sentiment has been relatively mixed but stable, with some improvement evident during the first quarter. Debt market conditions continued to improve in early 2024, both in pricing and liquidity. Markets saw notable evidence of spread compression during the first quarter across the U.S. and parts of Europe and Asia. However, since the close of the quarter, the release of the March inflation numbers in the U.S. are putting into question when and if the Fed will cut rates this year. Rate cuts in Europe could begin as early as June, an early signal of a divergent rate policy relative to the Fed.

Investor propensity to transact is greater in markets where price adjustments are more transparent. Pricing is believed to be stabilizing in the U.S. and UK for core product. In Asia Pacific and parts of Europe, investors remain concerned about further price adjustments, in particular where there is less alignment between buyers’ and sellers’ expectations and a lack of transactional evidence. Price adjustments in Asia Pacific to-date are coming through most quickly in Australia and South Korea.

More buyers are active in the U.S. and UK markets, a function of increasing confidence in pricing levels and a fear of missing out on opportunities. While less evident in closed transactions to date, an uptick in cross-border interest is evident in bidding activity. As a result, there has been an increase in JLL’s Global Bid Intensity Index across most sectors in early 2024, with dynamics stronger for the logistics and living sectors. However, the bid-ask spread remains, indicating the need for further price discovery and an increase in transaction activity to close the value gap.