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Global real estate investment plunges 33% amid Covid pandemic

Asia-Pacific takes hardest hit of a 45% drop in volumes; investment levels expected to remain low for 2020

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The UK and other major countries have indicated that they intend to boost spending on infrastructure projects to help lift their economies out of recession.

London

GLOBAL real estate investment fell by 33 per cent in the first half of 2020 as the novel coronavirus pandemic battered economies and disrupted deals.

The Asia-Pacific region took the biggest hit, with volumes down 45 per cent from the year-earlier period, because it was the first struck by the outbreak, said a report from broker Savills.

Investment dropped by 36 per cent in the Americas and 19 per cent 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.

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"However, certain sectors are expected to outperform as investors focus on secure assets, namely logistics, residential and life sciences," he added.

The global economy has been hammered by the pandemic, with the International Monetary Fund (IMF) forecasting a 4.9 per cent contraction this year.

The fund's chief economist Gita Gopinath has said that the cumulative loss for the world economy this year and next as a result of the recession is expected to reach US$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 per cent 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 per cent in the first half of the year, followed by a 41 per cent drop for retail properties, said the Savills report. Industrial and residential properties fared better.

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

The UK and other major countries have indicated that they intend to boost spending on infrastructure projects to help lift their economies out of recession.

British 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," Savills' Mr Hope said. BLOOMBERG

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